Is cash flow a measure of investors’ total demand for equities?
Mutual fund cash flow does not measure total demand for equities. There is no established correlation between mutual fund flows and stock market activity. Mutual funds own only about 20 percent of the total U.S. equities outstanding. Larger percentages are owned directly by U.S. and foreign individual investors, domestic pension plans, and state government retirement plans. In order to measure total demand, you would need information on the activities of these investors in addition to mutual fund cash flow. Unfortunately, comparable data is not available on non-mutual fund investors.
