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Mutual Funds and Stock and Bond Market Stability

Author

Listed:
  • Edwards, F.R.
  • Zhang, X.

Abstract

The unprecedented growth of mutual funds has raised questions about the impact of mutual fund flows on stockand bond prices. Many believe that the equity bull market of the 1990's is atributable to the huge flows of funds into equity mutual funds during this period, and that a withdrawal of those funds could send stock prices plummeting. This article investigates the relationship between aggregate monthly mutual fund flows (sales, redemptions, and net sales) and stock and bond monthly returns during a 30-year period beginning January 1961 utilizing Granger causality and instrumental variables analysis.

Suggested Citation

  • Edwards, F.R. & Zhang, X., 1997. "Mutual Funds and Stock and Bond Market Stability," Papers 97-22, Columbia - Graduate School of Business.
    • Handle: RePEc:fth:colubu:97-22
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    More about this item

    Keywords

    BONDS ; STOCK MARKET;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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