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Stock returns and mutual fund flows in the Korean financial market : A system approach
| Title |
Stock returns and mutual fund flows in the Korean financial market
Similar Titles
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|---|---|
| Sub Title | A system approach |
| Material Type | Articles |
| Author(English) |
Kim, Jaebeom; Kim, Jung-Min |
| Publisher |
[Seoul] : Bank of Korea |
| Date | 2016 |
| Journal Title; Vol./Issue | BOK Working Paper:(no. 2016-3) |
| Pages | 29 |
| Subject Country | South Korea(Asia and Pacific) |
| Language | English |
| File Type | Documents |
| Original Format | |
| Subject | Economy < General |
| Holding | Bank of Korea; KDI School |
| License |  |
Abstract
This paper investigates dynamic and causal relations between stock returns and mutual fund flows in Korea using a system method which utilizes information from the stock, bond, and money markets. For this purpose, we employ DSUR proposed by Mark, Ogaki, and Sul (2005), SURECM, and two causality tests by Granger (1969) and Sims (1972) in a system method to account for cross equation correlations among markets which have a close relationship with one another. Furthermore, we make use of information in the variance-covariance matrix of residual to improve the efficiency of the statistical estimates. The empirical evidence from the system method indicates that fund flows do not respond to eliminate the deviation from long-run equilibrium, and stock prices cause net fund flows in the Korean market, implying that investors move their money to the securities that yield higher returns to rebalance their investment portfolios in the short-run. (The rest omitted)
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