publication . Preprint . 2003

Asset Allocation of Mutual Fund Investors

Dengpan Luo;
Open Access
  • Published: 01 Jul 2003
This paper studies mutual fund investors' asset allocation decisions using monthly flow data of U.S mutual fund industry from 1984 to 1998. We find that mutual fund investors change their asset allocations between stocks and bonds in reaction to business conditions tracked by changes in expected stock market returns. They tend to allocate less into stock funds during the trough of a business cycle when expected stock market returns are higher and to allocate more into stock funds during the peak of a business cycle when expected returns are lower. We also find that variables that capture the changes of real macroeconomic activities have strong impact on mutual f...
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