Stock returns, mutual fund flows and spillover shocks

Paresh Narayan (), Seema Narayan () and Prabheesh K.p

Pacific-Basin Finance Journal, 2014, vol. 29, issue C, 146-162

Abstract: In this paper we examine the dynamic relationship between stock returns and mutual fund flows in India by using a generalised VAR model. We find that spillover shocks—that is, stock return shocks and mutual fund flow shocks together explain as much as 20% of the total forecast error variance of stock returns and mutual fund flows. We create a spillover index of shocks emanating from stock returns and mutual fund flows and tests whether it can actually predict stock returns and mutual fund flows. We find it does. Using the spillover index, we forecast stock returns and mutual fund flows, devise trading strategies for a mean–variance investor, and demonstrate the economic significance of the spillover index.

Keywords: Stock returns; Mutual fund flows; Spillover; Financial crisis; VAR model (search for similar items in EconPapers)
JEL-codes: G12 G17 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (56)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927538X14000389
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:29:y:2014:i:c:p:146-162

DOI: 10.1016/j.pacfin.2014.03.007

Access Statistics for this article

Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee

More articles in Pacific-Basin Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().