The Dynamic Relationship Between Market Volatility and Aggregate Mutual Fund Flows
Post by MSF Chula at Sunday, 10 January 2021 05:53 PM

This paper aims to examine the dynamic relationship between market volatility and aggregate open-end mutual fund flow through Structural VAR model (SVAR) by separating into equity and fixed income funds in Thailand to answer our anticipation whether the market volatility has impact to the Thai investors’ decision for their fund trading or not. As the empirical results, we find that the market volatility has temporary negative impact to Thai investors’ decision. A structural VAR impulse response analysis demonstrates that shock in market volatility has negative impact in aggregate equity fund flow longer than aggregate fixed income fund flow, implying more risk averse of Thai investors toward high risk investment. We also find the evidence that Thai investor time market volatility for their fund trading through the result of impulse response function. Furthermore, the result of a variance decomposition analysis reveals that Thai investors are more concerned with market volatility during the extreme market movement like global financial crisis period.

Last updated at Sunday, 10 January 2021 05:53 PM