Systemic risk of UCITS investment funds and financial market stability tested using MRS model

Jakša Krišto (), Alen Stojanović () and Hrvoje Filipović ()
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Jakša Krišto: Faculty of Economics and Business, University of Zagreb
Alen Stojanović: Faculty of Economics and Business, University of Zagreb
Hrvoje Filipović: European Actuarial Services, Erst & Young Financial-Business Advisors SpA

No 1508, EFZG Working Papers Series from Faculty of Economics and Business, University of Zagreb

Abstract: Systemic risk came into attention in the period of recent financial crisis. Importance of financial intermediation of investment funds is posing to a systemic influence of this sector to a stability of a financial market and therefore whole financial sector. This was proven through investment behavior, fire sales and net outflows from investment funds during the financial crisis. The article is testing systemic risk of whole range of different UCITS investment funds and behavior of these institutions as well as influence on financial market stability. Methodology is based on Markov regime switching model. A conclusion in this article proves existence of systemic risk in returns of analyzed UCITS investment funds and their strong systemic interconnections with returns and volatility on a financial market. Different investment strategy and type of UCITS investment fund shows no resistance to systemic risk according to this research.

Keywords: systemic risk; UCITS investment funds; financial stability; interconnectedness; Markov regime switching model (search for similar items in EconPapers)
JEL-codes: C58 G01 G15 G23 (search for similar items in EconPapers)
Pages: 15
Date: 2015-10-20
New Economics Papers: this item is included in nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:zag:wpaper:1508

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