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Liquidity and Flows of U.S. Mutual Funds

Sept. 17, 2015

Paul Hanouna, Jon Novak, Tim Riley, and Christof Stahel


We examine the U.S. mutual fund industry with particular attention paid to fund flows, the liquidity of fund portfolios, and the interaction of those characteristics. Mutual funds in investment categories that hold potentially less liquid assets are growing quickly and often have volatile flows. Alternative strategies have both highest average net flow and highest average net flow volatility of any investment category.  Among many other empirical results, we show that the liquidity of the equity portfolio of U.S. equity funds is greater when flow volatility is greater and that the liquidity of those same portfolios decreases after large outflows.


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