Determinants of mutual fund flows

Abstract

Purpose – The purpose of this paper is to study the determinants of aggregate fund flows to both equity and hybrid mutual funds. The authors test three hypotheses that help explaining the relationship between mutual fund flows and stock market returns, namely; the feedback-trader hypothesis, the price-pressure hypothesis, and the information-response hypothesis. Design/methodology/approach – The study relies on Swedish quarterly data on mutual fund flows over the period 1998-2013. The methodology is twofold; through the structural models (AR(1)) the authors can say something regarding the relationship between mutual fund flows and financial macro variables. The analysis is further strengthened by utilizing a vector autoregressive model to test for Granger causality in order to determine the order of events. Findings – Similar to both Warther (1995) and Jank (2012), the authors only find support for the information-response hypothesis. Additionally, the authors find new financial variables that have predictive power in determining mutual fund flows, namely; market fear (VIX), exchange rate, households’ expectation regarding inflation as well as outflows from mutual bond funds. Originality/value – The study contributes to the body of literature in three ways. First, it complements recent findings on determinants of mutual fund flows but the authors also add to the knowledge by included new macro financial variables describing the real economy. Second, the authors include a few additional variables. Third, the vast majority of previous studies have used US data, the authors add to that a deeper understanding of determinants of mutual fund flows in smaller economies by using Swedish data.

Classification of Open-End Investment Funds Using Artificial Neural Networks. The Case of Polish Equity Funds

“…Qureshi et al (2019) prove that investors choose to invest in equity-based funds when economic conditions are good, but when they are poor, investors move to the income-type funds. Therefore the fund flows forecast the economic conditions (Ferson & Kim, 2012;Jank, 2012;Kopsch et al, 2015). We find the other side of the fundmacroeconomy relation-the economic conditions may be considered as the open-end fund classification guide-depending on the business cycle, the equity funds may be more or less tempted to drift the style in order to rescue the fund flows balance.…”

Investor confidence and mutual fund performance in emerging markets

“…The literature suggests that mutual fund industry growth may be characterized by macroeconomic drivers such as GDP growth, inflation and interest rates, etc. Jank (2012) and Kopsch et al (2015) investigated the relationship between mutual fund flows and the real economy, and they found that stock market returns and flows of mutual fund investors commonly react to macroeconomic information. New variables are added and found to be significantly related to fund flows such as the dividend–price ratio, default spread, relative T-Bill rate and consumption–wealth ratio.…”

“…In subsequent studies, the effectiveness of management was examined through the association of mutual fund returns with characteristic attributes such as fund size, fund expenses and turnover ratio (Gallagher, 2003;Hoepner, Rammal, Rezec, 2011;Ferreira, Keswani, Ramos, and Miguel, 2013;Mansor, Bhatti, and Ariff, 2015). In a range of studies where the performance of mutual funds has been evaluated, from different perspectives, mixed results have been found on the factors that determine fund performance across different financial markets (Ramasamy and Yeung, 2003;Korkeamaki and Smythe, 2004;Jank, 2012;Kopsch, Song, and Wilhelmsson 2015).…”

Investigating Media and Communication Channel Search Behaviour of Retail Investors for Investment Decision in Emerging Financial Markets

“…There is lot of research on mutual funds in recent decades especially in developed nations, where researchers focussed on MF effectiveness (Golec and Stark, 2004), MF returns (Hoepner et al, 2011;Ferreira et al, 2013;Mansor et al, 2015), fund performance across diverse financial markets (Ramasamy and Yeung, 2003;Jank, 2012;Kopsch et al, 2015). However, research on mutual fund in this efflorescing economy conducted on fund performance (Banegas et al, 2013;Sapar and Madava, 2003;Afza and Rauf, 2009;Sipra, 2006), mutual fund fees and expenses (Lamphun and Wongsurawat, 2012), fund characteristics and fund-level factors (Angelidis et al, 2013;Bialkowski and Otten, 2011;Cuthbertson et al, 2012;Howell, 2001;Nguyen and Nguyen, 2019;Ramasamy and Yeung, 2003).…”