"Index Funds and Stock Market Growth".

• Author: Metzgar, Judd
• Position: Abstract - Brief Article

Goetzmann

William

Massa

Massimo

The National Bureau of Economic Research, Working Paper #7033, August 1999.

This research article examines the relationship between stock market activity and investor demands. Using high-frequency data on index fund trading, coupled with a separate analysis of inflows and outflows, this article suggest that investor demand influences stock returns, with causality moving in the opposite direction only when market conditions decline. The use of high-frequency (daily) data interjects a new dimension to previous work in the mutual fund industry. Past studies have relied on low-frequency (quarterly) trading data and tend to support the idea that investors chase market performance and have little aversion to risk. In contrast, this research...