The actual hard data is difficult to read to those without an econometric understanding. By Roger M. Edelen The Wharton School, University of Pennsylvania, Philadelphia. The William E. Simon Graduate School of Business Administration, University of Rochester, New York. We study the relation between market returns and unexpected aggregate flow into U.S. equity funds, using semi-weekly and daily flow data. The lagged response of flow indicates either a common response of both returns and flow to new information, or positive feedback trading.
Additional tests suggest that the concurrent relation reflects flow driving returns.
The sample includes over 90 fund families. From its samples' flow and the historic relation with ICI flow, MFTT also provides subscribers with an estimate of aggregate ICI flow, but we only use the actual MFTT flow. The MFTT sample has been roughly constant over the sample period, although a few changes have taken place. For example, in 1997 the Fidelity family of funds was added. Continue to next page.