We propose a flow-based explanation for two long-standing anomalies in empirical finance – Sell in May and the January effect. We find that mutual fund flows exhibit similar seasonal patterns as stock returns. After controlling for fund flows both calendar effects become insignificant. We...

This paper proposes a novel approach to determine whether mutual funds time the market. The proposed approach builds on a heterogeneous agent model, where investors switch between cash and stocks depending on a certain switching rule. This represents a more flexible, intuitive, and parsimonious...