A Study on the Fund Flow of Korean Capital Market

• Published in: Seonmul yeongu (Online) 2018-05, Vol.26 (2), p.247-281
• Main Authors: Baek, Jae-Seung, Ha, June Sam, Lee, Sang Whi
• Format: Article
• Language: English
• Subjects: Capital markets; Derivatives; Efficient markets
• ISSN: 2713-6647; 1229-988X; 2713-6647
• DOI: 10.1108/JDQS-02-2018-B0004

In this paper, we examine whether fund market reactions are affected by the characteristics of categorized features of fund. To investigate the goal of the paper, we consider macroeconomic factors as well as financial characters. We classify fund flow into four groups depending upon type of fund and fund characters to determine which category is better to increase fund flow for capital market after these financial occurrence. In this regard, our research suggests important evidence about the effect of financial factor on fund flow with a case of an detailed situation in Emerging market. In order to test the hypothesis, we use seemingly unrelated regression (SUR) model to choose significant factors among various types of fund market-related changes. Our sample consisted of fund flows from 2006 to 2016 collected by Korean Financial Association and Bank of Korea. The empirical results are summarized as follows : First, we find that capital market index, exchange rate affect fund flows with time-lagged value changes. Second, the stock index fund and banking sector fund sales show strong positive relations with the fund flow changes. Third, values of the fund flow are significantly related with fund sales by asset management’s affiliated financial institution. These results are consistent with the hypotheses that the increase and decrease in the fund flows due to capital market situation are more pronounced as the financial factors fit. Our results suggest that it is necessary to consider the fundamental characteristics of fund flow changes as well as the external economic environment to get a more efficient market performance and supervision.