A causality between fund performance and stock market

Ho-Yong Kim, Okyu Kwon and Gabjin Oh

Physica A: Statistical Mechanics and its Applications, 2016, vol. 443, issue C, 439-450

Abstract: We investigate whether the characteristic fund performance indicators (FPI), such as the fund return, the Net asset value (NAV) and the cash flow, are correlated with the asset price movement using information flows estimated by the Granger causality test. First, we find that the information flow of FPI is most sensitive to extreme events of the Korean stock market, which include negative events such as the sub-prime crisis and the impact of QE (quantitative easing) by the US subprime and Europe financial crisis as well as the positive events of the golden period of Korean Composite Stock Price Index (KOSPI), except for the fund cash flow. Second, both the fund return and the NAV exhibit significant correlations with the KOSPI, whereas the cash flow is not correlated with the stock market. This result suggests that the information resulting from the ability of the fund manager should influence stock market. Finally, during market crisis period, information flows between FPI and the Korean stock market are significantly positively correlated with the market volatility.

Keywords: Mutual fund; Granger causality; Information flow (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:443:y:2016:i:c:p:439-450

DOI: 10.1016/j.physa.2015.08.041

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