Do Mutual Fund Flows Influence Stock Market Volatility? Further Evidence from Emerging Market

Fiza Qureshi (), Saba Qureshi () and Sobia Shafaq Shah ()
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Fiza Qureshi: Institute of Business Administration, University of Sindh, Jamshoro, 76090, Sindh, Pakistan.
Saba Qureshi: Institute of Business Administration, University of Sindh, Jamshoro, 76090, Sindh, Pakistan.
Sobia Shafaq Shah: Institute of Business Administration, University of Sindh, Jamshoro, 76090, Sindh, Pakistan.

Journal for Economic Forecasting, 2021, issue 3, 35-51

Abstract: This study investigates the dynamic relationship between 27 different classes of mutual funds and stock market volatility in Pakistan. Using wavelets at multiple time horizons, the findings reveal both positive and negative association between the majority of mutual fund classes and stock market volatility, which implies momentum and contrarian feedback behavior of mutual funds in response to high stock market fluctuations. The results confirm that the relationship between variables is assorted in nature. The correlation between variables confirms the short-term relationship. Moreover, the Granger coherence results are momentous for some of the mutual fund classes, which reflect long-run components holding the forecasting ability. These conclusions assist in foreseeing and hedging strategies against market losses and have important policy implications for investors, portfolio managers, market analysts, and policymakers.

Keywords: institutional investors; market volatility; wavelets; Pakistan (search for similar items in EconPapers)
JEL-codes: G1 G11 G14 G17 G2 G23 (search for similar items in EconPapers)
Date: 2021
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