Mutual funds as an alternative to direct stock investment: A cointegration approach

Abstract

The great growth of mutual funds (FIM) in Spain over recent years raises the question whether an investor adopting a passive management strategy can consider those funds as a serious alternative to direct investment in the stock exchange. Thus, this paper presents a new approach to research on the Spanish investment fund market. It studies the Spanish stock funds versus the alternative of direct investing in the stock exchange using the stock index Ibex 35 as the benchmark. One can say that a fund replicates the benchmark index when both variables share common trends in the long run. Therefore, cointegration methodology is used to determine the longrun relationship between the funds value and Ibex 35. It is found that 11 out of 63 funds are cointegrated with the stock index, hence those funds could be used for investors seeking a passive management strategy.

Relationship between macroeconomic variables and net asset values (NAV) of equity funds: Cointegration evidence and vector error correction model of the Hong Kong Mandatory Provident Funds (MPFs)

“…Ben-Zion et al (1996) find that the three foreign country funds which include Germany, U.K., and Japan listed in the U.S. stock market are not cointegrated with but have causal relation to their national stock markets. Matallin and Nieto (2002) document little evidence of cointegration between the mutual funds and the Spanish stock market index Ibex 35. Chu (2010) documents that 56.43% of the equity funds authorized to be included in Hong Kong MPF schemes have their price levels cointegrated with stock market index.…”

Determinants of pension plan fees in Spain

“…This has led to the publication of numerous papers, Shamsuddin (2001), Thogersen (2001), Matallı´n and Nieto (2002), Levy and Ma´ntey (2003), Blake (2004) and Caporale et al (2004) that attempt to explain the role of collective investment institutions in the financial market and in the economy in general. In addition to these topics, other issues related to portfolio management have also been studied, where mutual fund performance and fees have come to the forefront.…”

The price linkages between the equity fund price levels and the stock markets: Evidences from cointegration approach and causality analysis of Hong Kong Mandatory Provident Fund (MPF)

“…The causality test shows the presence of dual causality between the sample fund prices in these three markets and their own stock market indices, but not with the US market. Matallin and Nieto (2002) document little evidence of cointegration between the mutual funds and the Spanish stock market index Ibex 35. Their findings indicate only 11 out of 63 (representing 17.5% of the total) funds are cointegrated with the index.…”