Determinants of Mutual Fund Flows in the Indian Stock Market: Insights Through the Nonlinear Autoregressive Distributed Lag Bounds-testing Approach with Structural Breaks

Abstract

The study investigates the determinants of mutual fund (MF) flows with special reference to the Indian stock market using monthly data over the period of January 2012 to December 2020. The analysis has been conducted using the linear and nonlinear autoregressive distributed lag bounds testing approach. The impact of structural breaks on the model has been incorporated by using dummies. The results reveal that the negative and positive changes in stock returns and volatility have asymmetric impact on fund flows by MFs. Macroeconomic variables have a significant impact on the investment decisions made by MFs. The trading patterns of MFs and foreign institutional investors (FIIs) are opposite to each other, that is, purchases by FIIs lead to sales by MFs and vice- versa. The trading pattern of FIIs significantly impacts the direction of MF flows.

Keywords

ARDL Asymmetry Multipliers Efficient Market Hypothesis FIIS Mutual Fund Flows NARDL Stock Market Structural Break

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