How does mutual fund flow respond to oil market volatility?

Bader Jawid Alsubaiei, Giovanni Calice and Andrew Vivian

The European Journal of Finance, 2024, vol. 30, issue 1, 28-52

Abstract: We comprehensively study the impact of oil market volatility on mutual fund flow. In particular, using an extensive dataset on Saudi Arabia covering virtually all equity funds over 2006–2017, this paper provides the first analysis of the linkages between fund flow and oil market volatility. Our main findings show that investors shift substantially their asset allocation to the equity mutual fund sector in periods of high volatility. Our further evidence suggests that flow to high oil-exposed funds is more sensitive to oil volatility than low oil-exposed funds. This is consistent with investors valuing professional management highly during risky periods in a setting where alternatives to equity investment are limited. Our study provides new evidence for a fast-growing market and reveals important implications for the mutual fund market which helps investors, academics and regulators to better understand the behaviour of this market.

Date: 2024
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DOI: 10.1080/1351847X.2020.1842784

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