Index Funds and Stock Market Growth
We use 2 years of daily flows for three major Standard and Poor's index funds to analyze the relationship among index funds, asset prices, and volatility. We find strong contemporaneous correlation between inflows and returns, no evidence for positive feedback trading, and evidence that negative market returns may induce subsequent sales. Market volatility affects investors as dynamic risk sharing, but higher volatility does not drive investors from the market. Bullish newsletter sentiment is associated with greater inflows. We report high correlation among investor disagreement and market uncertainty and flows. Dispersion in advice and open interest correlate with lower inflows.
Year of publication: |
2003
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Authors: | Goetzmann, William N. ; Massa, Massimo |
Published in: |
The Journal of Business. - University of Chicago Press. - Vol. 76.2003, 1, p. 1-28
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Publisher: |
University of Chicago Press |
Saved in:
Online Resource
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