We study flows between investment funds and their effects on asset prices in a simple two-period version of Vayanos and Woolley (2010, VW). As in VW, flows cause assets to comove in ways unrelated to fundamentals, affect assets with high idiosyncratic risk the most, and raise the expected...

"Capital gain distributions by mutual funds generate tax liability for taxable shareholders, thereby reducing their after-tax returns. Taxable investors who are considering purchasing fund shares around distribution dates have an incentive to delay their purchase until after the distribution,...