Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/142029
Authors: 
Babalos, Vassilios
Caporale, Guglielmo Maria
Spagnolo, Nicola
Year of Publication: 
2016
Series/Report no.: 
DIW Discussion Papers 1583
Abstract: 
The 2008-2009 global financial crisis has raised new questions about the relationship between equity fund flows and stock market returns. This paper analyses it using US monthly data over the period 2000:1-2015:08. A VAR-GARCH(1,1)-in-mean model with a BEKK representation is estimated, and a switch dummy for the global financial crisis is also included. We find causality-in-mean from stock market returns to equity fund flows (consistently with the feedback-trading hypothesis) only in the post-September 2008 period. There are also volatility spillovers from stock market returns to equity fund flows both before and after the crisis; however, this relationship is not stable, becoming weaker in the crisis period. As a robustness check we augment the model with a set of macroeconomic control variables. Their inclusion does not affect the main results.
Subjects: 
Equity Fund Flows
Stock Market Returns
VAR-GARCH-in-mean model
Volatility
JEL: 
G23
C32
Document Type: 
Working Paper

Files in This Item:
File
Size
321.35 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.