How is in/out flows measured

[dallas27]

When you read in articles that investors moved 10billion in or out of certain market, how is that determined? Seems to me for every sell there is a buy, and should wash transactionally. It can't just be pure market value either. Can't intuitively wrap my mind around that measurement.

 

[Curmudgeon]

If people are generally more interested in getting out of a given market/stock/whatever, then the laws of supply/demand will cause the price of it to drop. If the total market cap drops by 10bn as a result, I think that can be summed up by saying 10bn moved out.

 

[dallas27]

If people are generally more interested in getting out of a given market/stock/whatever, then the laws of supply/demand will cause the price of it to drop. If the total market cap drops by 10bn as a result, I think that can be summed up by saying 10bn moved out.

That doesn't line up, if understand articles i read, frequently their are outflows even when indices are rising, and vice-versa.

 

[dallas27]

I think i may have found it online. I *think* flows are using the major funds/etf to estimate total flow into/ out of markets. This makes at least some sense.

 

[ERD50]

I think i may have found it online. I *think* flows are using the major funds/etf to estimate total flow into/ out of markets. This makes at least some sense.

But as you say, there is always a buyer and a seller. So how can we identify an in or out flow?

Lets say on day, 1% of the people sell their equity mutual fund and go to cash (I assume that;s a huge amount for a mutual fund in one day). OK, the fund would need to sell those shares, and the fund balance would be lower.

But somebody, somewhere, had to buy those shares. So where is the 'out'?

I can even paint an odd picture - say the market takes a steep hit during the day, and that 1% get scared and put in 'sell' orders. But the sell doesn't happen until after the close. So what if the market recovered in the last 15 minutes of the day? You'd have all these sells, but on a slightly up day.

Outside of companies buying back shares or releasing new shares, I'm not sure how any in/out flow can happen. I are confused.

-ERD50

 

[dallas27]

But as you say, there is always a buyer and a seller. So how can we identify an in or out flow?



Lets say on day, 1% of the people sell their equity mutual fund and go to cash (I assume that;s a huge amount for a mutual fund in one day). OK, the fund would need to sell those shares, and the fund balance would be lower.



But somebody, somewhere, had to buy those shares. So where is the 'out'?



I can even paint an odd picture - say the market takes a steep hit during the day, and that 1% get scared and put in 'sell' orders. But the sell doesn't happen until after the close. So what if the market recovered in the last 15 minutes of the day? You'd have all these sells, but on a slightly up day.



Outside of companies buying back shares or releasing new shares, I'm not sure how any in/out flow can happen. I are confused.



-ERD50

Funds do not always have a buyer and seller, they can create and destroy shares throughout the day

 

[MRG]

When you read in articles that investors moved 10billion in or out of certain market, how is that determined? Seems to me for every sell there is a buy, and should wash transactionally. It can't just be pure market value either. Can't intuitively wrap my mind around that measurement.

I think the problem is the definition of "inflow/outflows". In what context?

If it's a fund it's easy. Redemptions vs. Purchases. ICI probably has a definition of what they report on, but I'll bet that's as advanced as it gets.

ETFs and indexes would be similar to funds.

Individual issues, I have no idea how that's tracked, if it is!

 

[GrayHare]

Lets say on day, 1% of the people sell their equity mutual fund and go to cash (I assume that;s a huge amount for a mutual fund in one day). OK, the fund would need to sell those shares, and the fund balance would be lower.

But somebody, somewhere, had to buy those shares. So where is the 'out'?

To pay the 1% sellers of the fund, let's say the fund ticker is VXXXX, that fund sold some shares of the individual companies it had been holding, perhaps IBM, AAPL, etc. Buyers bought IBM, AAPL, etc. shares, not VXXXX shares.

 

[kaneohe]

see #3 here Best Websites to Track the Money Flow into Stocks & Mutual Funds

Almost sounds like they snoop on every trade so they can get the flows on individual stocks during the trading session.

 

[MRG]

This is from the ICI website, weekly fund flows. Fund companies belong to the ICI and provide high level statistics.

At the bottom it says how they get their numbers.

ENDNOTES

1*Mutual fund data represent estimates of net new cash flow, which is new sales minus redemptions combined with net exchanges, while exchange-traded fund (ETF) data represent net issuance, which is gross issuance less gross redemptions. Data for mutual funds that invest primarily in other mutual funds and ETFs that invest primarily in other ETFs were excluded from the series.

2*ICI classifies mutual funds and ETFs based on language in the fund prospectus. For a detailed description of ICI classifications...

https://www.ici.org/research/stats/flows/combined/combined_flows_08_23_17

 

[Curmudgeon]

As MRG noted, it depends on what you're talking about. An open fund, which has no limit on the number of shares, can have money flow in or out as people contribute or remove money from the fund. This can happen independently of the direction which the underlying price per share of that fund is moving. A stock, or a market segment (e.g. Utilities) has a fixed number of shares at any one time, and the only way to measure in/outflow would be in terms of total market cap - which moves in the same direction as price.

So, what 'market' are we discussing?

 

[NW-Bound]

That doesn't line up, if understand articles i read, frequently their are outflows even when indices are rising, and vice-versa.

I read something similar recently. I think the outflow was reported by mutual fund managers whose clients were selling. Obviously, someone else was buying, and I suspect it was institutional investors.

Now, whom do they call the "smart money"?