We demonstrate that we can satisfy
both criteria if we implement the method using mutual
fund data.Under the assumption that aparticul arasset
pricing model holds,we use the main insight from Berkand
Green (2004) to show that positive (negative) abnormal
return realizations in a mutual fund investment must be
associated with positive net present value buying (selling)
opportunities. We then measure investor reactions to these
opportunities by observing the subsequent capital flow into
(out of) mutual funds.