Measuring Investor Sentiment with Mutual Fund Flows

Download or read book Measuring Investor Sentiment with Mutual Fund Flows written by Azi Ben-Rephael and published by . This book was released on 2011 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate a proxy for monthly shifts between bond funds and equity funds in the USA: aggregate net exchanges of equity funds. This measure (which is negatively related to changes in VIX) is positively contemporaneously correlated with aggregate stock market excess returns: One standard deviation of net exchanges is related to 1.95% of market excess return. Our main new finding is that 85% (all) of the contemporaneous relation is reversed within four (ten) months. The effect is stronger in smaller stocks and in growth stocks. These findings support the notion of quot;noisequot; in aggregate market prices induced by investor sentiment.