סמינר במימון חשבונאות

Speaker: Daniel Nathan, Bank of Israel Jerusalem and Coller School of Management TAU

Mutual Fund Flows and Government Bond Returns

Joint with Menachem Abudy (BIU) and Avi Wohl (TAU)

Abstract

We investigate daily flows to Israeli government bonds mutual funds, which are held primarily by retail investors. We divide the bonds into six categories: nominal/CPI-linked; short-term, intermediate-term, and long-term maturity. We find that daily net flows are contemporaneously

correlated with price changes of all categories. These price changes are significant and they subsequently reverse fully or mostly within 10 trading days. The price reversal indicates that the initial price changes are due to “noise.” We find that these price distortions affect breakeven

inflation—a measure of inflation expectations. Our findings indicate that even government bonds are affected by retail sentiment.