Analysis of the Impact of Stock Market Yield Fluctuations on the Assets Under Management of Fixed-Income Funds: Examining Periods of Upturns and Downturns

Document Type : Original Article

Authors

1 M.Sc. student ,Department of Financial Management and Insurance, University of Shahid Beheshti, Tehran, Iran

2 Assistant Prof, Department of Financial Management and Insurance, University of Shahid Beheshti, Tehran, Iran.

10.48308/jfmp.2024.105460

Abstract

Purpose: This text examines the impact of stock market return volatility on the investment levels in fixed-income funds. Given the significant fluctuations in financial markets and the increasing attention of investors to fixed-income funds as a safe option, this research aims to analyze the relationship between stock market volatility and the assets under management of these funds. Investors are divided into two categories: active and passive, each with different investment strategies. Active investors seek to profit from short-term fluctuations, while passive investors prefer to preserve capital in safer instruments. The research shows that investor behavior is influenced by market conditions and their expectations regarding risk and return. Additionally, this study uses the GARCH model to investigate whether stock market return volatility has a significant effect on the assets under management of fixed-income funds. The results of this research can assist managers and investors in making optimal decisions and may lead to the identification of effective strategies for attracting new investments into fixed-income funds.
Method: This text conducts a statistical analysis of two variables: AUM (Assets Under Management) and INDEX (Stock Market Return) over the period from 2014 to 2023. The results indicate that the volatility of the INDEX is greater than that of AUM, and the data distribution is skewed to the right, indicating a non-normal distribution. The stationarity of these variables is examined using the Dickey-Fuller and Phillips-Perron tests, with results showing that both variables are stationary. The (1,1) GARCH model is chosen to analyze volatility and demonstrates that stock market return volatility has a significant impact on AUM volatility. Furthermore, the DUMMY variable assesses the effects of new policies on AUM, with results indicating a negative impact of these policies on the assets under management. Lastly, the (1,1) E-GARCH model shows that positive shocks to AUM volatility have a greater impact than negative shocks, potentially due to investor psychology. The results of these analyses can aid decision-makers and financial analysts in better understanding the capital market and formulating appropriate strategies.
Findings: The research indicates that the volatility of the Tehran Stock Exchange overall index return has a significant impact (at the 1% level) on the assets under management (AUM) of fixed-income funds, such that an increase in market returns leads to an increase in these assets. Additionally, E-GARCH modeling results show that positive shocks have a greater impact than negative shocks on fund asset volatility, and past volatility in market returns helps predict future AUM volatility. Furthermore, the negative impact of new policies on the total assets under management following changes in investment regulations in the stock market is also emphasized.
Conclusion: This research explores the effect of stock market return volatility on the level of assets under management in fixed-income funds. The results indicate that market return volatility positively and significantly affects the assets of these funds, such that an increase in market return can lead to an increase in assets under management. The influence of past volatility on predicting future asset volatility is also highlighted. Analyses suggest that new policies may have negative effects on the total assets and have failed to achieve the goal of stimulating investment in the stock market. Additionally, positive and negative market volatilities affect the assets under management differently, with positive shocks having a greater impact. These findings are important for decision-makers and policymakers, indicating a need to reconsider executive policies. The research can help fund managers and investors make optimal decisions and design effective financial strategies. It is suggested that investors pay attention to past volatilities and adjust their management strategies based on thorough analyses.

Keywords

References

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Financial Management Perspective
Volume 14, Issue 47
2024
Pages 59-88

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