Does Mutual Fund Flow Reflect Investor Sentiment?

Download or read book Does Mutual Fund Flow Reflect Investor Sentiment? written by Daniel Indro and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the relationship between net aggregate equity fund flow and investor sentiment using weekly flow data. Using sentiment indicators from the American Association of Individual Investors and Investors Intelligence, I find that net aggregate equity fund flow in the current week is higher when individual investors became more bullish in the previous and current weeks. Moreover, higher net aggregate equity fund flow in the current week induces newsletter writers to become more bullish in the subsequent week. The relationship between net aggregate equity fund flow and investor sentiment remains strong even after accounting for the effects of risk premium and inflation. Overall, the evidence suggests that the behavior of equity fund investors is influenced not only by economic fundamentals, but also by investor sentiment.