Stock returns, mutual fund flows and spillover shocks

Narayan, P K and Narayan, S and K P, Prabheesh (2014) Stock returns, mutual fund flows and spillover shocks. Pacific-Basin Finance Journal, 29. pp. 146-162. ISSN 0927-538X

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Abstract

In this paper we examine the dynamic relationship between stock returns and mutual fund flows in India by using a generalised VAR model. We find that spillover shocks-that is, stock return shocks and mutual fund flow shocks together explain as much as 20% of the total forecast error variance of stock returns and mutual fund flows. We create a spillover index of shocks emanating from stock returns and mutual fund flows and tests whether it can actually predict stock returns and mutual fund flows. We find it does. Using the spillover index, we forecast stock returns and mutual fund flows, devise trading strategies for a mean-variance investor, and demonstrate the economic significance of the spillover index.

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IITH Creators:
IITH CreatorsORCiD
K P, PrabheeshUNSPECIFIED
Item Type: Article
Uncontrolled Keywords: Stock returns;Mutual fund flows;Spillover;Financial crisis;VAR model
Subjects: Social sciences > Business Finance
Divisions: Department of Liberal Arts
Depositing User: Library Staff
Date Deposited: 31 Mar 2015 10:16
Last Modified: 31 Mar 2015 10:16
URI: http://raiith.iith.ac.in/id/eprint/1432
Publisher URL: http://dx.doi.org/10.1016/j.pacfin.2014.03.007
OA policy: http://www.sherpa.ac.uk/romeo/issn/0927-538X/
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