Equity fund flows, market returns, and market risk: evidence from China
Fiza Qureshi (),
Ali M. Kutan (),
Habib Hussain Khan () and
Saba Qureshi ()
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Fiza Qureshi: University of Sindh
Ali M. Kutan: Southern Illinois University Edwardsville
Habib Hussain Khan: International Islamic University
Saba Qureshi: University of Sindh
Risk Management, 2019, vol. 21, issue 1, 48-71
Abstract We examine contemporaneous and dynamic relationship among equity fund flows, market returns, and market risk in China by applying structural vector autoregression (SVAR) and reduced-form VAR models using monthly and quarterly data over the period of 2005–2016. Results from the reduced-form VAR suggest that equity funds can play important role in reducing market risk by actively participating in the equity market. Moreover, adverse market conditions can cause equity funds to refrain from active participation in trading activities. The results from the structural VAR show that market risk and stock returns are contemporaneously related to fund flows, suggesting that concurrent relationships are important in studying the linkages between aggregate equity fund flows and stock market variables. We also discuss the policy implications of findings in the context of recent downturn in the Chinese stock market.
Keywords: Equity fund flows; Stock returns; Stock market volatility; China (search for similar items in EconPapers)
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