Structural VAR Approach to Mutual Fund Cash Flows: Net Flows, Inflows, and Outflows

In a dynamic structural VAR framework, we investigate how mutual fund cash flows respond to market volatilities, market returns, and fund returns, using the data of inflows and outflows obtained from Form N‐SAR filings with the SEC in the EDGAR system. We find that market volatility (market return) shocks have contemporaneous negative (positive) effects on net flows. Fund return shocks have a significant effect on net flows for more than 64% of sample funds in each fund style group. Logistic regression shows the importance of diverse fund characteristics. Disposition effect of fund investors depends also on fund characteristics.