Mutual funds and stock market volatility: An empirical analysis of Asian emerging markets
Ali M. Kutan,
Izlin Ismail and
Chan Sok Gee
Emerging Markets Review, 2017, vol. 31, issue C, 176-192
We investigate the empirical relationship between aggregate mutual fund flows and stock market volatility in Asian emerging markets by providing a comparative analysis of equity and balanced funds with market-wide volatility. Using a panel vector autoregressive model, we find that market volatility increases with increase in equity fund flows. However, it decreases with increase in balanced fund flows suggesting rational investment behaviour of balanced mutual funds. In addition, equity funds follow the market volatility positively, suggesting positive feedback trading (momentum) behaviour. On the other hand, balanced funds follow market volatility negatively and exhibit negative feedback trading behaviour (contrarian behaviour). We also show that macroeconomic variables influence both fund flows and market volatility. We discuss the implications of the findings for policy makers and portfolio managers.
Keywords: Stock market volatility; Mutual funds; Momentum and contrarian behaviour; Asian emerging markets (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:31:y:2017:i:c:p:176-192
Access Statistics for this article
Emerging Markets Review is currently edited by Jonathan A. Batten
More articles in Emerging Markets Review from Elsevier
Series data maintained by Dana Niculescu ().