Mutual fund flows and fluctuations in credit and business cycles

Azi Ben-Rephael, Jaewon Choi, Itay Goldstein

Research output: Contribution to journalArticlepeer-review


Several measures of credit-market booms are known to precede downturns in real economic activity. We offer an early indicator for all known measures of credit booms. Our measure is based on intra-family flow shifts towards high-yield bond mutual funds. It predicts indicators such as growth in financial intermediary balance sheets, increase in shares of high-yield bond issuers, and downturns of various measures of credit spreads. It also directly predicts the business cycle by positively predicting GDP growth and negatively predicting unemployment. Our results provide support for the investor demand-based narrative of credit cycles and can be useful for policymakers.

Original languageEnglish (US)
Pages (from-to)84-108
Number of pages25
JournalJournal of Financial Economics
Issue number1
StatePublished - Jan 2021
Externally publishedYes


  • Business cycle
  • Credit cycle
  • High-yield bonds
  • Investor demand
  • Leading indicator
  • Mutual fund flows

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management


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