Consumer Interest Rates and Retail Mutual Fund Flows

Jesus Sierra
This paper documents a link between the real and financial sides of the economy. We find that retail equity mutual fund flows in Canada are negatively related to current and past changes in a component of the prime and 5-year mortgage rates that is uncorrelated with government rates. The effect is present when we control for other determinants of fund flows and is more pronounced for big and old funds. The results suggest that consumers’...
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