The dynamic relationship between aggregate fund flows and share market returns: Empirical evidence from BRIC


LEMESHKO Oleksandra

Year of publication 2017
Type Article in Proceedings
Conference European Financial Systems 2017. Proceedings of the 14th International Scientific Conference
MU Faculty or unit

Faculty of Economics and Administration

Field Management and administrative
Keywords equity fund flows; excess share market returns; Granger-causality; BRIC
Description Already for more than twenty years investigation of dynamic relationship between aggregate fund flows and share returns represents considerable interest for both practitioners and academicians. The former may use such investigation as useful aid for volatility timing for their investment portfolios; the latter may use such evidence as a proof of efficient market hypothesis violation, which, if found, will have far-reaching implications for the theory of finance. In this paper we aim to investigate the dynamic bidirectional interaction between aggregate fund flows and excess share market returns in a group of emerging BRIC economies. Particularly, we investigate the possibility of a causality mechanism through which aggregate domestic equity fund flows may affect local excess share market returns and vice versa in short-term and long-term period by means of Engle-Granger causality test and VECM.
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