The paper explores whether the co-movement of market returns and equity fund flows can be explained by a common response to macroeconomic news. I find that variables that predict the real economy as well as the equity premium are related to mutual fund flows. Changes in dividend-price ratio...

This study brings to light the new empirical fact that flows into US domestic equity mutual funds depend less on past fund returns when the risk-free rate declines. A one-percent drop in interest rates is associated with a decrease in the slope of the flow-performance relationship of around 10%....

This paper investigates the relation between mutual fund flows and the real economy.The findings of this paper support the theory that the positive co-movement of flows into equity funds and stock market returns is explained by a common response to macroeconomic news.Variables that predict the...