Investor Flows and Stock Market Returns

This study simultaneously analyzes the relation between aggregate stock market returns and cash flows (net purchases of equity) from a broad array of investor groups in the United States over a long period of time from 1952 to 2004. We find strong evidence that quarterly flows are auto-correlated for each of the different investor groups. We further document a significant and positive contemporaneous relation between stock market returns and flows of Mutual Funds and Foreign Investors