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Title:Mutual fund flows, expected returns, and the real economy PDF Logo
Authors:Jank, Stephan
Issue Date:2011
Series/Report no.:CFR working paper 11-04
Abstract:The paper explores whether the co-movement of market returns and equity fund flows can be explained by a common response to macroeconomic news. I find that variables that predict the real economy as well as the equity premium are related to mutual fund flows. Changes in dividend-price ratio explain mutual fund flows beyond the information contained in returns. Further predictive variables such as default spread, relative T-Bill rate and, in particular consumption-wealth ratio also explain mutual fund flows. Mutual fund flows are, in accordance with the information-response hypothesis, forward-looking and predict real economic activity.
Subjects:aggregate mutual fund flows
equity premium
return predictability
asset pricing
Document Type:Working Paper
Appears in Collections:CFR Working Papers, Centre for Financial Research (CFR), Universität Köln

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