Equity Mutual Fund Flows and Benchmark Portfolios in Sweden
Abstract: The purpose of our study is to investigate the effect of net flows to mutual funds by isolating the effects of active managed funds and index linked funds on benchmark portfolio returns. We consider factors that cause demand driven price impacts on stocks. We use data from the Stockholm stock exchange and focus on Swedish registered mutual funds, which invest primarily in Sweden. Mutual fund data is obtained from Morningstar. The theoretical basis underpinning our study is the efficient market hypothesis, the price pressure hypothesis and the imperfect substitution hypothesis. Our findings are in line with previous results confirming a positive effect for unexpected net flows to on portfolio returns. However, this is only present for net flows to actively managed funds. We recommend further research of the whole mutual funds market, isolating the effects of different segments.
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