Eur. Phys. J. B 50, 659-669 (2006)
https://doi.org/10.1140/epjb/e2006-00169-x

Modeling the net flows of U.S. mutual funds with stochastic catastrophe theory

Lipper, a Reuters Company, 707 17th Street, 22nd Floor, Denver, CO, 80202, USA

Corresponding author: ^a andrew.clark@lipper.reuters.com

Received: 7 June 2005
Revised: 25 November 2005
Published online: 17 May 2006

Abstract

Using the recent work of Hartelman, van der Maas, and Wagenmakers, we demonstrate the use of invariant stochastic catastrophe models in finance for modeling net flows (the difference between purchases and redemptions of fund shares) of U.S. mutual funds. We validate Goetzmann et al. and others' work concerning the importance of sentiment variables on stock fund flows. We also answer some of the questions Goetzmann et al. and Brown et al. pose at the end of their respective papers. We end with possible experiments for experimental economists and sociophysicists.