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Stock returns and mutual fund flows in the Korean financial market : A system approach

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Frame of Image s.ac.kr. The authors are grateful for helpful comments from Moon Jung Choi, Woon Gyu Choi, Jong Ku Kang, Geun-Young Kim, Jaerang Lee, Jin-Su Park, and Joon Myung Woo. The first author is grateful for the financial support from the Bank of Korea; however, the views expressed herein are those of the authors and do not necessarily reflect those of the Bank of Korea. We would also like to thank Jin Woong Lee for his outstanding research support.
Contents
Ⅰ. Introduction ···················· 1 · ·· · ·· ·· ·· · ·· ·· · ·· ·· · · ·· ·· ·· · ·· ·· · ·· ·· ·· · · ·· ·· · ·· ·· ·· · ·· ·· · ·
··· ·· ·· ·· ·· ·· ·· ·· ·· ··· · ·· ·· ··· ·· Ⅱ. Korean Mutual Fund Industry ··········· 5
············ ············ ············ Ⅲ. Econometric Methodologies ············ 6
· ··· ··· ··· ·· · ·· ··· ··· ··· ·· ··· ··· ·· ·· Ⅳ. Data and Empirical Results ·············8
· ··· ·· ·· ·· ··· ·· ·· ··· · ·· ··· ·· ·· ··· ·· ·· ··· · ·· ·· ··· ·· ·· ··· ·· ·· · Ⅴ. Conclusion ·····················20
······················ ······················ ······················ References ·······················22
Stock Returns and Mutual Fund Flows in the Korean Financial Market: A System Approach
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)


Full Text
Title Stock returns and mutual fund flows in the Korean financial market
Similar Titles
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 pdf
Subject Economy < General
Holding Bank of Korea; KDI School

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)