Asset allocation decisions of mutual fund investors
DOI:
https://doi.org/10.61190/fsr.v13i4.4802Keywords:
Predictability in stock and bond returns, Personal investing, Asset allocation, Mutual fundsAbstract
I extend the Warther (1995) evidence to show that stock market returns are related to contemporaneous flows into mutual funds that invest in risky stocks and bonds, but are unrelated to flows into funds that invest in safer stocks and bonds. I examine whether common sources of predictability in returns and flows can explain this contemporaneous relation. I find that variables with predictive ability for stock returns, such as the lagged one-month T-bill rate and the lagged term premium, also predict flows into the risky categories of mutual funds.
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