The Effect of Financial Stress Index on Mutual Funds Returns

Document Type : Research Article

Authors

1 PhD Student, Department of Economics, Urmia Branch, Islamic Azad University, Urmia, Iran

2 Assistant Professor, Department of Economics, Urmia Branch, Islamic Azad University, Urmia, Iran

3 Assistant Professor, Department of Financial Economics, Faculty of Economic and Management, Urmia University, Urmia, Iran

Abstract

The purpose of this article is to investigate the effect of the financial stress index (FSI) on the returns of mutual funds (separately including mutual funds and mixed mutual funds) in Iranian capital market during 2011-2021 on a monthly basis. For this purpose, the principal component analysis method is used to construct the financial stress index, and the effect of financial stress on the returns of mutual funds in two regimes of high return and low return was investigated using the Markov switching model. Results show that the financial stress in the high return regime has a negative effect on the return of investment funds in stocks and mixed. In a regime with low return, financial stress has had a positive effect on the return of investment funds in stocks and mixed. Despite the same direction of the effect of financial stress on the performance of both types of studied funds, this situation indicates the asymmetry information in the effect of financial stress on the return of investment funds.

Keywords

Main Subjects

References

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Journal of Applied Economics Studies in Iran
Volume 12, Issue 48
January 2024
Pages 161-192

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