Review Article Open Access

An Empirical Study to Trace the Impact of Macro-Economic Variables and Information Asymmetry on the Aum of Indian Mutual Funds- A Vecm and E-Garch Model Approach

Abstract

Early theories of finance discarded the role of human behaviour in decision making, but over a period it is realised that human emotions play pivotal role in investors’ choice. Investors’ behaviour gets affected by so many factors namely personal factors, demographic factors, geographic factors, regulatory factors, macro- economic factors etc. Amongst these factors, macro-economic factors play a direct and important role in investment decision making because these factors impact entire system. In this study the impact of macro-economic variables is tracked on the investors’ behaviour towards mutual funds by taking Assets Under Management (AUM) as a proxy of for investor behaviour. Further, this study attempts to trace the impact of bad news on the investor behaviour. For accomplishing the objectives vector error correction model and E-GARCH model is used. It is found that 6 identified macro-economic variables explain 48% variation in the AUM and the error correction term is not statistically significant and it is also found that leverage effect exists in AUM which means that bad news impacts the volatility of AUM more than good news.

Priyank Kulshreshtha*, Santi Swarup K, Swami Prasad Saxena

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