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The Interaction of Mutual Fund Flows and Stock Returns: Evidence From The Turkish Capital Market

Author

Listed:
  • Berna AYDOGAN

    (Izmir University of Economics, Faculty of Business, International Trade and Finance)

  • Gulin VARDAR

    (Izmir University of Economics, Faculty of Business, International Trade and Finance)

  • Gokce TUNC

    (Izmir University of Economics, Faculty of Business, International Trade and Finance)

Abstract

The substantial growth and popularity of mutual funds as an investment tool has risen the need for an understanding of the significant implications for the financial markets. This paper examines the dynamic interaction between mutual fund flows and stock returns for an emerging capital market, namely Turkey and more specifically, analyzes the possibility of a causal mechanism whether mutual fund flows influence stock returns and vice versa. Long run dynamic relationship is examined by using cointegration tests, short-run dynamic causal relationship through vector error correction model. The results of cointegration test show that there is cointegrating relationship among each category of mutual fund flows and stock index. Moreover, the statistical evidence indicates that there is bidirectional causality between all categories of mutual fund flows and stock returns. Thus, the empirical findings will prove to be extremely useful information for investors who need to understand these dynamic interactions.

Suggested Citation

  • Berna AYDOGAN & Gulin VARDAR & Gokce TUNC, 2014. "The Interaction of Mutual Fund Flows and Stock Returns: Evidence From The Turkish Capital Market," Ege Academic Review, Ege University Faculty of Economics and Administrative Sciences, vol. 14(2), pages 163-173.
    • Handle: RePEc:ege:journl:v:14:y:2014:i:2:p:163-173
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    References listed on IDEAS

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    1. Osterwald-Lenum, Michael, 1992. "A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 461-472, August.
    2. Shleifer, Andrei, 1986. "Do Demand Curves for Stocks Slope Down?," Journal of Finance, American Finance Association, vol. 41(3), pages 579-590, July.
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    Cited by:

    1. Ros Zam Zam Sapian & Jing Quan Lee, 2018. "Return, Volatility and Equity Fund Flows Linkages: Evidence from an Emerging Market," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 8(7), pages 172-186, July.
    2. Yue Meinn GOH & Ros Zam Zam SAPIAN, 2017. "Return, Volatility And Fund Flows Linkages: Malaysian Evidence," Management and Marketing Journal, University of Craiova, Faculty of Economics and Business Administration, vol. 0(2), pages 59-69, November.

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    More about this item

    Keywords

    Mutual funds flows; stock markets; causality;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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