Mutual funds and stock market volatility: An empirical analysis of Asian emerging markets

Fiza Qureshi, Ali Kutan, Izlin Ismail and Sok-Gee Chan

Emerging Markets Review, 2017, vol. 31, issue C, 176-192

Abstract: We investigate the empirical relationship between aggregate mutual fund flows and stock market volatility in Asian emerging markets by providing a comparative analysis of equity and balanced funds with market-wide volatility. Using a panel vector autoregressive model, we find that market volatility increases with increase in equity fund flows. However, it decreases with increase in balanced fund flows suggesting rational investment behaviour of balanced mutual funds. In addition, equity funds follow the market volatility positively, suggesting positive feedback trading (momentum) behaviour. On the other hand, balanced funds follow market volatility negatively and exhibit negative feedback trading behaviour (contrarian behaviour). We also show that macroeconomic variables influence both fund flows and market volatility. We discuss the implications of the findings for policy makers and portfolio managers.

Keywords: Stock market volatility; Mutual funds; Momentum and contrarian behaviour; Asian emerging markets (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1566014117301772
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:ememar:v:31:y:2017:i:c:p:176-192

DOI: 10.1016/j.ememar.2017.05.005

Access Statistics for this article

Emerging Markets Review is currently edited by Jonathan A. Batten

More articles in Emerging Markets Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().