Equity fund flows, market returns, and market risk evidence from China

we examine contemporaneous and dynamic relationship among equity fund flows, market returns, and market risk in China by applying structural vector autoregression (SVAR) and reduced-form VAR models using monthly and quarterly data over the period of 2005–2016. Results from the reduced-form VAR sugge...

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Bibliographic Details
Published inRisk management (Leicestershire, England) Vol. 21; no. 1; pp. 48 - 71
Main Authors Qureshi, Fiza, Kutan, Ali M., Khan, Habib Hussain, Qureshi, Saba
Format Journal Article
LanguageEnglish
Published London Springer Science + Business Media 01.03.2019
Palgrave Macmillan UK
Palgrave Macmillan
Subjects
Economic conditions
Economic models
Economics and Finance
Equity
Equity funds
Finance
Funds
Markets
Mutual funds
ORIGINAL ARTICLE
Return on investment
Risk
Risk Management
Securities markets
Trading
China
Stock market volatility
Equity fund flows
Stock returns
China
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Summary:we examine contemporaneous and dynamic relationship among equity fund flows, market returns, and market risk in China by applying structural vector autoregression (SVAR) and reduced-form VAR models using monthly and quarterly data over the period of 2005–2016. Results from the reduced-form VAR suggest that equity funds can play important role in reducing market risk by actively participating in the equity market. Moreover, adverse market conditions can cause equity funds to refrain from active participation in trading activities. The results from the structural VAR show that market risk and stock returns are contemporaneously related to fund flows, suggesting that concurrent relationships are important in studying the linkages between aggregate equity fund flows and stock market variables. We also discuss the policy implications of findings in the context of recent downturn in the Chinese stock market.
ISSN:1460-3799
1743-4637
DOI:10.1057/s41283-018-0042-3