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Nonlinear dynamic relations between equity return and equity fund flow: Korean market empirical evidence

Title
Nonlinear dynamic relations between equity return and equity fund flow: Korean market empirical evidence
Authors
Kim S.-W.Kim Y.
Ewha Authors
김세완
SCOPUS Author ID
김세완scopus
Issue Date
2010
Journal Title
Asia-Pacific Journal of Financial Studies
ISSN
1226-1165JCR Link
Citation
vol. 39, no. 2, pp. 139 - 170
Indexed
SCOPUS WOS scopus
Abstract
This research studies the dynamic relationship between equity returns and equity fund flows by incorporating nonlinear properties of the two variables. Nonlinear estimation based on a smooth transition autoregressive model reveals results different from those previously reported based on a linear relationship. Our empirical results find that there is significant mutual Granger causality between equity returns and equity fund flows. In addition, by introducing the dividend yield effect, significant Granger causality is also found between the three variables. This can be interpreted as meaning that demand for equities is downward sloping for both the price pressure effect and the information effect. Relatively fast regime switching and dynamic instability show that stock investment through equity funds is mostly short-horizon-oriented investment. © 2010 Korean Securities Association.
DOI
10.1111/j.2041-6156.2010.00007.x
Appears in Collections:
사회과학대학 > 경제학전공 > Journal papers
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