DYNAMICS OF MUTUAL FUNDS IN RELATION TO STOCK MARKET: A VECTOR AUTOREGRESSIVE CAUSALITY ANALYSIS
In Bangladesh, primary and secondary mutual fund markets behave in a completely different way, where initial public offering (IPO) investors of mutual funds earn more than 250 percent rerun, whereas secondary market investors cannot even manage to cover the opportunity cost of their investment. Ther...
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| Format: | Article |
| Language: | English |
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EconJournals
2013-01-01
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| Series: | International Journal of Economics and Financial Issues |
| Subjects: | |
| Online Access: | http://www.econjournals.com/index.php/ijefi/article/view/341/pdf |
| _version_ | 1797923740051308544 |
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| author | Md. Shahadath Hossain A.B.M. Munibur Rahman Md. Salah Uddin Rajib |
| author_facet | Md. Shahadath Hossain A.B.M. Munibur Rahman Md. Salah Uddin Rajib |
| author_sort | Md. Shahadath Hossain |
| collection | DOAJ |
| description | In Bangladesh, primary and secondary mutual fund markets behave in a completely different way, where initial public offering (IPO) investors of mutual funds earn more than 250 percent rerun, whereas secondary market investors cannot even manage to cover the opportunity cost of their investment. There are few other abnormalities present in this market – unlike everywhere in the world, most of the mutual funds are closed-end (92 percent) and closed-end mutual funds are barred to issue bonus or right shares. A total of 714 day’s observations, from January 2008 to December 2010, of four variables– DSE (Dhaka Stock Exchange) general index return, DSE general index turnover, mutual funds’ return and mutual funds’ turnover– are utilized. Stationarity of the variables are tested with Augmented Dickey-Fuller (ADF) unit root test and found that variables are in different order of integration. Long-term equilibrium relationships among the variables are tested with Johansen cointegration and it is found that DSE general index return and mutual funds’ return are cointegrated. Toda-Yamamoto (TY) version of granger non-causality test is employed and bidirectional causality is found moving from DSE (Dhaka Stock Exchange) general index turnover to DSE general index return, whereas unidirectional causality is found moving from mutual fund’s return to DSE general index return, mutual funds’ return to mutual funds turnover, and DSE general index turnover to mutual funds turnover. This finding helps to conclude that equity shares’ demand drives the mutual funds demand but even higher demand of mutual funds fails to raise its own price unless underlying value of the mutual funds changes. |
| first_indexed | 2024-04-10T14:50:56Z |
| format | Article |
| id | doaj.art-2ad005fbfd724f7abdc33b68a7100e65 |
| institution | Directory Open Access Journal |
| issn | 2146-4138 |
| language | English |
| last_indexed | 2024-04-10T14:50:56Z |
| publishDate | 2013-01-01 |
| publisher | EconJournals |
| record_format | Article |
| series | International Journal of Economics and Financial Issues |
| spelling | doaj.art-2ad005fbfd724f7abdc33b68a7100e652023-02-15T16:07:36ZengEconJournalsInternational Journal of Economics and Financial Issues2146-41382013-01-0131191201DYNAMICS OF MUTUAL FUNDS IN RELATION TO STOCK MARKET: A VECTOR AUTOREGRESSIVE CAUSALITY ANALYSISMd. Shahadath HossainA.B.M. Munibur RahmanMd. Salah Uddin RajibIn Bangladesh, primary and secondary mutual fund markets behave in a completely different way, where initial public offering (IPO) investors of mutual funds earn more than 250 percent rerun, whereas secondary market investors cannot even manage to cover the opportunity cost of their investment. There are few other abnormalities present in this market – unlike everywhere in the world, most of the mutual funds are closed-end (92 percent) and closed-end mutual funds are barred to issue bonus or right shares. A total of 714 day’s observations, from January 2008 to December 2010, of four variables– DSE (Dhaka Stock Exchange) general index return, DSE general index turnover, mutual funds’ return and mutual funds’ turnover– are utilized. Stationarity of the variables are tested with Augmented Dickey-Fuller (ADF) unit root test and found that variables are in different order of integration. Long-term equilibrium relationships among the variables are tested with Johansen cointegration and it is found that DSE general index return and mutual funds’ return are cointegrated. Toda-Yamamoto (TY) version of granger non-causality test is employed and bidirectional causality is found moving from DSE (Dhaka Stock Exchange) general index turnover to DSE general index return, whereas unidirectional causality is found moving from mutual fund’s return to DSE general index return, mutual funds’ return to mutual funds turnover, and DSE general index turnover to mutual funds turnover. This finding helps to conclude that equity shares’ demand drives the mutual funds demand but even higher demand of mutual funds fails to raise its own price unless underlying value of the mutual funds changes.http://www.econjournals.com/index.php/ijefi/article/view/341/pdfMutual FundDhaka Stock ExchangeVector Auto RegressiveAugmented Dickey-FullerCointegrationStationarity |
| spellingShingle | Md. Shahadath Hossain A.B.M. Munibur Rahman Md. Salah Uddin Rajib DYNAMICS OF MUTUAL FUNDS IN RELATION TO STOCK MARKET: A VECTOR AUTOREGRESSIVE CAUSALITY ANALYSIS International Journal of Economics and Financial Issues Mutual Fund Dhaka Stock Exchange Vector Auto Regressive Augmented Dickey-Fuller Cointegration Stationarity |
| title | DYNAMICS OF MUTUAL FUNDS IN RELATION TO STOCK MARKET: A VECTOR AUTOREGRESSIVE CAUSALITY ANALYSIS |
| title_full | DYNAMICS OF MUTUAL FUNDS IN RELATION TO STOCK MARKET: A VECTOR AUTOREGRESSIVE CAUSALITY ANALYSIS |
| title_fullStr | DYNAMICS OF MUTUAL FUNDS IN RELATION TO STOCK MARKET: A VECTOR AUTOREGRESSIVE CAUSALITY ANALYSIS |
| title_full_unstemmed | DYNAMICS OF MUTUAL FUNDS IN RELATION TO STOCK MARKET: A VECTOR AUTOREGRESSIVE CAUSALITY ANALYSIS |
| title_short | DYNAMICS OF MUTUAL FUNDS IN RELATION TO STOCK MARKET: A VECTOR AUTOREGRESSIVE CAUSALITY ANALYSIS |
| title_sort | dynamics of mutual funds in relation to stock market a vector autoregressive causality analysis |
| topic | Mutual Fund Dhaka Stock Exchange Vector Auto Regressive Augmented Dickey-Fuller Cointegration Stationarity |
| url | http://www.econjournals.com/index.php/ijefi/article/view/341/pdf |
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