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The 2008–2009 global financial crisis has raised new questions about the relationship between equity fund flows and stock market returns. This paper provides new insights by using US monthly data over the period 2000:1–2015:8 and estimating a VAR-GARCH(1, 1)-in-mean model with a BEKK representation, which also includes a switch dummy for the global financial crisis. We find causality-in-mean from stock market returns to equity fund flows (consistently with the feedback-trading hypothesis) only in the post-September 2008 period. There are also volatility spillovers from stock market returns to equity fund flows both before and after the crisis; however, this relationship is not stable, becoming weaker in the crisis period. As a robustness check, we augment the model with a set of macroeconomic control variables. Their inclusion does not affect the main results.

Equity fund flows and stock market returns in the USA before and after the global financial crisis: a VAR-GARCH-in-mean analysis