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

Author

Listed:
  • 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.)

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.

Suggested Citation

  • Fiza QURESHI & Saba QURESHI & Sobia Shafaq SHAH, 2021. "Do Mutual Fund Flows Influence Stock Market Volatility? Further Evidence from Emerging Market," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 35-51, June.
    • Handle: RePEc:rjr:romjef:v::y:2021:i:3:p:35-51
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    More about this item

    Keywords

    institutional investors; market volatility; wavelets; Pakistan;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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