Abstract
Using a unique database of aggregate daily flows to equity mutual funds in Israel, we find strong support for the price pressure hypothesis regarding mutual fund flows: Mutual fund flows create temporary price pressure that is subsequently corrected. We find that flows are positively auto-correlated, and are correlated with market returns (R2 of 20%). Our main finding is that approximately one-half of the price change is reversed within ten trading days. This support for the price pressure hypothesis complements microstructure research concerning price impact and price noises in stocks by indicating price noise at the aggregate market level.
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.
