The Effect of Stock Prices on the Demand for Money Market Mutual Funds

James Price Dow, Board of Governors of the Federal Reserve System, Douglas W. Elmendorf
1998 Finance and Economics Discussion Series  
We are grateful to Athanasios Orphanides and Gretchen Weinbach for helpful comments and to Jim Haas for outstanding research assistance. The views expressed here are our own and not necessarily those of the Federal Reserve Board or other members of its staff. Abstract During the 1990s households have sharply increased the share of their portfolios held in equities and mutual funds and sharply reduced the share held in bank accounts. We show that this reallocation has substantially increased the
more » ... ially increased the impact of financial-market developments on the demand for money. Specifically, both increases and decreases in the Wilshire 5000 have boosted the demand for money funds during the 1990s, although they had little effect on money funds during the 1980s. The estimated effects in the 1990s are generally statistically significant and economically important.
doi:10.17016/feds.1998.24 fatcat:qrfgqnvaergannl334bhhwhdii