Abstract
We study the effects of unexpected changes in the stance of monetary policy on mutual fund performance and allocation decisions over the recent period of unconventional U.S. monetary policy. Taking an agnostic approach on the transmission mechanism of monetary policy on mutual fund investing, we find that monetary policy shocks have a direct effect on fund performance and flow dynamics, and that the effect of these surprises differs by investment strategy. The results show that an unexpected tightening of the stance of policy is associated with negative performance and outflows from bond funds, in particular those investing in government, investment grade, and international bonds. Results also point to a negative relationship between equity fund performance and policy tightening. Moreover, Federal Reserve’s balance sheet policy (i.e. large-scale asset purchases) have a strong positive effect on equity fund returns, especially on those investing in emerging markets.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
