The dynamics of market volatility, market return, and equity fund flow : International evidence in the 21st century
Many studies have investigated the relationship between market return and aggregate equity fund flow since Warther (1995). Unlike previous studies, we investigate the relationships among market return, market volatility, and aggregate equity fund flow using a structural VAR model with economically appropriate identification in an international context. The major empirical results are as follows: First, reduced-form and structuralform VAR analyses demonstrate that, among the countries, the relationships are most evident in the U.S. Second, the structural VAR model shows that contemporaneous effects are the most relevant factor in the relationships among the three endogenous variables. Third, variance decomposition analysis results imply that fund flow shock has only minimal effects on market volatility and market return all over the sample countries. Fourth, hypothesis tests confirm the importance of contemporaneous effects, and the effects of return shock on aggregate equity fund flow are much more apparent than the effects of volatility shock. Fifth, the contemporaneous relation between volatility shock and market return is perfectly consistent with that of French, Schwert, and Stambaugh
(1987). In conclusion, the previous empirical evidence from the U.S. may not be applicable to other countries, particularly Asian countries.
학회소식
학회소식