Mutual fund flows and investors’ expectations in BRICS economies: Implications for international diversification

Fiza Qureshi; Habib Hussain Khan; Ijaz Ur Rehman; Abdul Ghafoor; Saba Qureshi

doi:10.1016/j.ecosys.2018.09.003

Mutual fund flows and investors’ expectations in BRICS economies: Implications for international diversification

Fiza Qureshi, Habib Hussain Khan, Ijaz Ur Rehman, Abdul Ghafoor, Saba Qureshi

Research output: Contribution to journal › Article › Research › peer-review

10 Citations (Scopus)

Abstract

This paper empirically examines the relationship between different classes of mutual funds, measures of investors’ expectations and business cycle movements in the BRICS markets over the 1996Q1-2017Q3 period. Applying the Panel Vector Autoregressive (PVAR) model in a Generalized Method of Moments (GMM) setting, the results suggest a strong causal relationship between mutual fund flows and measures of investors’ future expectations. In particular, fund flows are forward-looking and assist in forecasting real economic conditions. Moreover, investors choose to invest in riskier funds when economic conditions are good, while they prefer safer options in poor economic situations. These findings have important implications for international diversification.

Original language	English
Pages (from-to)	130-150
Number of pages	21
Journal	Economic Systems
Volume	43
Issue number	1
DOIs	https://doi.org/10.1016/j.ecosys.2018.09.003
Publication status	Published - Mar 2019
Externally published	Yes

Keywords

BRICS economies
Investors’ expectations
Macroeconomic variables
Mutual fund flows

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10.1016/j.ecosys.2018.09.003

Cite this

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title = "Mutual fund flows and investors{\textquoteright} expectations in BRICS economies: Implications for international diversification",

abstract = "This paper empirically examines the relationship between different classes of mutual funds, measures of investors{\textquoteright} expectations and business cycle movements in the BRICS markets over the 1996Q1-2017Q3 period. Applying the Panel Vector Autoregressive (PVAR) model in a Generalized Method of Moments (GMM) setting, the results suggest a strong causal relationship between mutual fund flows and measures of investors{\textquoteright} future expectations. In particular, fund flows are forward-looking and assist in forecasting real economic conditions. Moreover, investors choose to invest in riskier funds when economic conditions are good, while they prefer safer options in poor economic situations. These findings have important implications for international diversification.",

keywords = "BRICS economies, Investors{\textquoteright} expectations, Macroeconomic variables, Mutual fund flows",

author = "Fiza Qureshi and Khan, {Habib Hussain} and Rehman, {Ijaz Ur} and Abdul Ghafoor and Saba Qureshi",

year = "2019",

month = mar,

doi = "10.1016/j.ecosys.2018.09.003",

language = "English",

volume = "43",

pages = "130--150",

journal = "Economic Systems",

issn = "0939-3625",

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T1 - Mutual fund flows and investors’ expectations in BRICS economies

T2 - Implications for international diversification

AU - Qureshi, Fiza

AU - Khan, Habib Hussain

AU - Rehman, Ijaz Ur

AU - Ghafoor, Abdul

AU - Qureshi, Saba

PY - 2019/3

Y1 - 2019/3

N2 - This paper empirically examines the relationship between different classes of mutual funds, measures of investors’ expectations and business cycle movements in the BRICS markets over the 1996Q1-2017Q3 period. Applying the Panel Vector Autoregressive (PVAR) model in a Generalized Method of Moments (GMM) setting, the results suggest a strong causal relationship between mutual fund flows and measures of investors’ future expectations. In particular, fund flows are forward-looking and assist in forecasting real economic conditions. Moreover, investors choose to invest in riskier funds when economic conditions are good, while they prefer safer options in poor economic situations. These findings have important implications for international diversification.

AB - This paper empirically examines the relationship between different classes of mutual funds, measures of investors’ expectations and business cycle movements in the BRICS markets over the 1996Q1-2017Q3 period. Applying the Panel Vector Autoregressive (PVAR) model in a Generalized Method of Moments (GMM) setting, the results suggest a strong causal relationship between mutual fund flows and measures of investors’ future expectations. In particular, fund flows are forward-looking and assist in forecasting real economic conditions. Moreover, investors choose to invest in riskier funds when economic conditions are good, while they prefer safer options in poor economic situations. These findings have important implications for international diversification.

KW - BRICS economies

KW - Investors’ expectations

KW - Macroeconomic variables

KW - Mutual fund flows

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DO - 10.1016/j.ecosys.2018.09.003

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VL - 43

SP - 130

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JO - Economic Systems

JF - Economic Systems

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Mutual fund flows and investors’ expectations in BRICS economies: Implications for international diversification

Abstract

Keywords

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