Author: Hayan Omran
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Author:
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Category :
Languages : en
Pages :

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(Uncorrected OCR) Abstract of thesis entitled A Study of Mutual Fund Flow and Market Return Volatility Submitted by YingWANG for the Degree of Master of Philosophy at The University of Hong Kong in June 2003 Abstract Whether institutional trading stabilizes or destabilizes the market has long been a controversial issue that interests practitioners and academicians. In this study, we investigate the impact of institutional trading on the market by examining the daily relationship between aggregate flow into U.S. equity funds and market return volatility. We adopt three estimators of daily market volatility: (1) the high-frequency volatility estimated from the intraday return data of S & P 500 index, using the method of Andersen, Bollerslev, Diebold and Labys (2001) and Andersen, Bollerslev, Diebold and Ebens (2001), (2) the high-low volatility estimator developed by Parkinson (1980), and (3) the implied volatility index based on the option of the S & P 100 index. Our daily flow data are from the same source of Edelen and Warner (2001), but over a longer period, i.e., from February 3, 1998 to December 29,2002. Our initial evidence suggests a negative contemporaneous relationship between market volatility and aggregate mutual fund flow across the whole flow range. We further examine the relationships of market volatility and fund inflow and fund outflow, respectively. Our empirical results show that an asymmetric concurrent relationship between fund flow and market volatility exists: fund inflow is negatively correlated with market volatility, whereas fund outflow is positively correlated with market volatility. We discuss potential explanations for our results and suggest that they are consistent with information content differences between mutual funds' buy and sell orders. Our study also implies that individual investors and fund managers play joint roles in the market. We also investigate the daily relationship between idiosyncratic volatility and aggregate mutual fund.

Author: Dunhong Jin
Publisher: International Monetary Fund
ISBN: 1513519492
Category : Business & Economics
Languages : en
Pages : 46

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How to prevent runs on open-end mutual funds? In recent years, markets have observed an innovation that changed the way open-end funds are priced. Alternative pricing rules (known as swing pricing) adjust funds’ net asset values to pass on funds’ trading costs to transacting shareholders. Using unique data on investor transactions in U.K. corporate bond funds, we show that swing pricing eliminates the first-mover advantage arising from the traditional pricing rule and significantly reduces redemptions during stress periods. The positive impact of alternative pricing rules on fund flows reverses in calm periods when costs associated with higher tracking error dominate the pricing effect.

Author: Matthew I. Spiegel
Publisher:
ISBN:
Category :
Languages : en
Pages : 48

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Multiple studies have examined the relationship between performance and subsequent fund flows. Prior work takes a fund's dollar flows divided by its assets under management as the dependent variable. However, individual fund flows have to add up to the aggregate flow in every period. If aggregate flows are high, then on average individual flows will be so, and vice-versa. To accommodate this accounting identity, this paper uses market share as the dependent variable. Unlike percentage flows, market shares always add to the aggregate value: one. With market shares as the focus, the conclusion drawn here is that adding volatility to a fund's return process does not increase a firm's funds under management. Thus, contrary to some prior conclusions, this paper does not find support for the idea that fund flows provide managers with an incentive to engage in additional risk taking.

Author: Dengpan Luo
Publisher:
ISBN:
Category :
Languages : en
Pages : 69

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This paper examines the relation between market volatility and monthly mutual fund cash flows. We find that bond fund investors in the period of 1984 through 1998 do not respond to past stock market volatility at the aggregate level after we take into account the persistency of volatility over time and the relation between risks and returns. On the other hand, stock fund investors respond negatively to concurrent and past long term (semi-annual and annual) market volatility. Stock fund investors' volatility timing behavior explains why fund managers decrease market exposure during periods of high market volatility. We also find that the negative relation between stock fund flows and market volatility is not entirely driven by the persistency of volatility over time or the relation between risks and returns. Using semi-variance of daily stock market returns, we find no evidence that investors are only concerned about downside volatility. Both upside volatility and downside volatility have negative impact on subsequent stock fund flows. We also find that stock fund flows in our sample period have strong positive impact on the subsequent market volatility. It provides some evidence that the momentum of mutual fund investors, often referred to as quot;noisy tradersquot;, do destabilize the overall stock market to some extent.

Author: Charles Cao
Publisher:
ISBN:
Category :
Languages : en
Pages : 40

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We study the dynamic relation between aggregate mutual fund flow and market-wide volatility. Using daily flow data and a VAR approach, we find that market volatility is negatively related to concurrent and lagged flow. A structural VAR impulse response analysis suggests that shock in flow has a negative impact on market volatility: An inflow (outflow) shock predicts a decline (an increase) in volatility. From the perspective of volatility-flow relation, we find evidence of volatility timing for recent period of 1998-2003. Finally, we document a differential impact of daily inflow versus outflow on intraday volatility. The relation between intraday volatility and inflow (outflow) becomes weaker (stronger) from morning to afternoon.

Author: Roger M. Edelen
Publisher:
ISBN:
Category :
Languages : en
Pages : 39

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We study the relation between market returns and unexpected aggregate flow into U.S. equity funds, using semi-weekly and daily flow data. The reaction of flow and return --whether it be one reacting to the other, or both reacting to a third factor -- is fast and strong. The flow-return relation is mainly concurrent, but flow also follows returns with a one-day lag. The lagged response of flow indicates either a common response of both returns and flow to new information, or positive feedback trading. Additional tests suggest that the concurrent relation reflects flow driving returns.

Author: Roger M. Edelen
Publisher:
ISBN:
Category : Mutual funds
Languages : en
Pages : 31

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Author: Irwin Friend
Publisher: McGraw-Hill Companies
ISBN:
Category : Business & Economics
Languages : en
Pages : 228

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Book Description
"A Twentieth Century Fund study." Includes bibliographical references.

Author: Ayan Bhattacharya
Publisher: CFA Institute Research Foundation
ISBN: 1944960929
Category : Business & Economics
Languages : en
Pages : 38

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Exchange-traded funds (ETFs) revolutionized asset markets by using an innovative structure to make investing in a wide variety of asset classes simpler and cheaper. With their growing importance has come increasing concern that these products pose new risks to market stability and performance. This paper examines whether ETFs affect systemic risks in financial markets and, if they do, what the mechanism is by which this impact occurs and what can be done to keep the risks under control. We review current research and empirical evidence on these issues and discuss some emerging risks in ETFs. We ask whether we have the right “rules of the road” to deal with the new drivers of market behavior.