Toward a Macroprudential Regulatory Framework for Mutual Funds

Christos Argyropoulos (), Bertrand Candelon, Jean-Baptiste Hasse () and Ekaterini Panopoulou
Additional contact information
Christos Argyropoulos: Lancaster University
Jean-Baptiste Hasse: Aix-Marseille University

No GRU_2020_008, GRU Working Paper Series from City University of Hong Kong, Department of Economics and Finance, Global Research Unit

Abstract: This paper highlights the procyclical and unstable behaviour of mutual fund returns. It proposes a novel factor model that allows for regime changes associated with macroeconomic variables. Estimated on a panel covering 825 US equity mutual funds over a period of 30 years, it appears that the yield curve, the dividend yield and the industrial production coincide with regimes switches in the Fama-French factors. Furthermore, the estimated regimes perfectly match financial crises and economic downturns, thus confirming the procyclical behaviour of mutual funds' returns. These findings, coupled with the emerging systemic role of mutual funds, promote the consideration for a specific macroprudential regulatory framework.

Keywords: Financial Stability; MutualFundIndustry; Regulation; Macroprudential Framework (search for similar items in EconPapers)
JEL-codes: G18 G23 G28 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2020-04-29
New Economics Papers: this item is included in nep-cba, nep-his and nep-mac
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https://www.cb.cityu.edu.hk/ef/doc/GRU/WPS/GRU%232020-008%20Candelon.pdf (application/pdf)

Related works:
Working Paper: Toward a Macroprudential Regulatory Framework for Mutual Funds (2023)
Working Paper: Towards a macroprudential regulatory framework for mutual funds? (2023)
Working Paper: Toward a macroprudential regulatory framework for mutual funds (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:cth:wpaper:gru_2020_008

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