Chapter 10. Flow of Funds
Chapter Objectives
By the end of this chapter, you should
• Understand why knowledge of the flow of funds is important to determining stock market valuation
• Understand why liquidity plays an important role in potential stock market valuation
• Be familiar with measurements of market liquidity
• Understand the relationship between Federal Reserve policy and the cost of funds
Chapter Summary
Funds in the Marketplace
Money that is placed in money market mutual funds is money that can potentially flow into the stock market. Because households tend to sell stocks and place cash in money market mutual funds at market lows, the level of assets in these funds can be a contrarian indicator. Margin debt is the amount of funds ...
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