Economic Research and Perspectives

Economic Research and Perspectives

Role of Mutual funds in Economic Growth in Iran

Authors
karami Karami Ardali 1
Hussein Marzban 2
Ali Hussain Samadi 3
amin nazemi 4
1 Ph.D. Student, Department of Economics; College of Economics, Management and Social Science; Shiraz University. Shiraz, Iran
2 Associate Professor of Economics, Department of Economics; College of Economics, Management and Social Science; Shiraz University, Shiraz, Iran.
3 Professor of Economics Department of Economics; College of Economics, Management and Social Science; Shiraz University, Shiraz, Iran
4 Assistant Professor of Accounting, Department of Economics; College of Economics, Management and Social Science; Shiraz University. Shiraz, Iran.
Abstract
Aim and Introduction

The development of financial markets is critical for economic growth. One of the most important financial markets is the capital and stock market, where the prosperity of the stock market and financing through the stock market can develop any country's economy. Capital market development requires the efficient performance of financial intermediaries, including mutual funds. Iran’s economy has always faced the problem of insufficient liquidity and financing for production sectors. As a financial tool, mutual funds can moderate this problem with their existing potential. Therefore, the study aims to investigate the probable effect of mutual funds on economic growth.

Methodology

In the previous studies that have been done in this field, the descriptive-analytical aspect of the subject has been discussed. But these studies didn't provide an appropriate framework for analyzing the effect of mutual funds on economic growth. For this purpose, in the present study, based on the theoretical literature, a general equilibrium model has been designed, and the output of this model is obtained according to the optimization of different sectors of the economy. Assume a closed economy where mutual funds are investors with information and allocate capital to high-productivity firms. The economy has a single period with two production components, a representative mutual fund, and a representative household. We assume a high-productivity firm (H) and a low-productivity firm (L) with an equal number of producers. Both firms can obtain funds by issuing new stocks in the primary market. There is one representative mutual fund in the economy that can invest on behalf of the representative household. Therefore, the fund can invest as much as the fund flows (F) received from the household at the beginning of the period. We assume the mutual fund has sufficient access to information and production technology and can detect high-productivity firms. The household seeks to maximize utility, and the proposed utility function consists of only consumption. As utility and consumption are positively related, utility maximization is equivalent to consumption maximization. However, since the present study adopted a single-period economy, consumption equals income. Thus, maximum utility is represented by maximum income. Initial capital (W) can be directly invested in the primary market or indirectly invested in the secondary market by the mutual fund. This framework is a new aspect and the main contribution of research in this field. The output of the model is estimated using the GMM method for the period 2010:2 to 2020:4.

Findings

According to Table 5, most coefficients are statistically significant. The first lag of GDP was expectedly found to have a positive, significant impact on the GDP level and, thus, economic growth. Mutual fund investment was observed to have a positive, significant impact on GDP; a 1% rise in fund investment, on average, leads to a 0.473% increase in GDP. This finding is consistent with our theoretical framework. We expect mutual funds’ investments in the primary market, positively impact GDP since mutual funds have an information advantage over individual investors. Thus, they can optimally allocate resources to high-productivity firms (i.e., mutual funds have a higher ability than individual investors to identify high-productivity firms in light of their information advantage). The household wealth coefficient was estimated to be 0.255, suggesting that a 1% increase in the household’s wealth raises GDP by 0.255% on average. This finding is consistent with economic theories. The interaction of wealth and fund investment was estimated to have a coefficient of 0.257, implying a significant relationship. This coefficient was expectedly found to be positive, consistent with modeling. The interaction of fund flows and fund investment significantly affects GDP with a coefficient of -0.174. This coefficient was expectedly found to be negative, consistent with modeling. Fund flows were estimated to have no significant impact on GDP. Although it was found to have the expected sign, it has an insignificant impact on GDP and thus cannot be interpreted. The coefficient of the secondary market return was found to be significant only at a confidence level of 90%.

Discussion and Conclusion

Overall, mutual funds have a positive impact on GDP. These funds may improve the performance of Iran’s financial markets if they acquire an appropriate position in the financial market. A large number of individual traders have begun to trade on Iran’s stock market without financial knowledge and suffered massive losses in 2020-2021. If the mutual fund sector is active in Iran, in addition to the optimal allocation of resources, it can also help people for investment in the stock market and prevent crises such as 2020-2021. Eventually, the policy recommendation is that policymakers pay more attention to the development of mutual funds in short- and long-term policies.

Keywords: Mutual fund, Capital market, Economic growth, Primary market, GMM

JEL Classification: G11, G23, G51
Keywords
Mutual fund
Capital Market
economic growth
primary market
GMM

Subjects

ادکوبه هزاوه, و اسماعیل زاده مقری. (1399). ارزیابی رابطه عمر و مجموع دارایی‌های صندوق های سرمایه‌گذاری مشترک با کارایی آن‌ها با استفاده از روش تحلیل پوششی داده‌ها. دانش سرمایه‌گذاری, 9(36), 335-352.‎
تهرانی، ر.، و نوربخش، ع. (1388). مدیریت سرمایه‌گذاری، تهران: نگاه دانش.
تبریزی، ح.، و شریفیان، ر. (1387). بررسی اثر ریسک نامطلوب در ارزیابی عملکرد شرکت‌های سرمایه‌گذاری پذیرفته شده در بورس اوراق بهادار تهران. فصلنامه تحقیقات مالی، (24)9.
جباری، ر.، صالحی صدقیانی، ج.، و امیری، م. (1391). ارزیابی عملکرد و انتخاب پورتفوی از صندوق‌های سرمایه‌گذاری سهام. فصلنامه‌ی تحقیق در عملیات و کاربردهای آن، 1، 1-19.
حسین‌زاده س.، مهرآرا، م.، و توکلیان، ح. (1396). نقش صندوق توسعه ملی در کاهش نوسانات اقتصادی ایران رویکرد (DSGE). مجله تحقیق در عملیات و کاربردهای آن (ریاضیات کاربردی)، 9(1)، 1-19.
خدا رحمی، ب.، احمدی‌نیا، ح.، و داغانی، ر. (1390). مدیریت صندوق‌های سرمایه‌گذاری با نگاهی به ارزیابی عملکرد پرتفوی. تهران، ایران: انتشارات ترمه.
خان‌زاده، ک. (1385). صندوق‌های سرمایه‌گذاری مشترک. مجله‌ی سازمان بورس و اوراق بهادار؛ مدیریت پژوهش، توسعه و مطالعات اسلامی‌.
جباری, ر.، صالحی صدقیانی, ج.، و امیری، م. (1391). ارزیابی عملکرد و انتخاب پرتفوی از صندوق‌های سرمایه‌گذاری سهام. مجله تحقیق در عملیات و کاربردهای آن (ریاضی کاربردی)-دانشگاه آزاد لاهیجان, 9(1).
رستمی، م.، انصاری، ح.، و محمدعلی، م. (1396). ارزیابی توانایی موقعیت سنجی مدیران صندوق‌های سرمایه‌گذاری مشترک پذیرفته‌شده در بورس اوراق بهادار تهران با استفاده از رویکردهای شرطی و غیرشرطی. فصلنامه‌ی مدیریت دارایی و تأمین مالی، (1)5، 45-60.
ذاکرنیا، ا.، خدابخشیان خوانساری, ش.، و صالح آبادی، ع. (1400). مدل عملیاتی به‌کارگیری صندوق سرمایه‌گذاری خصوصی جهت پیاده‌سازی تأمین مالی پروژه‌ای. پژوهش های راهبردی بودجه و مالی, 2(3), 11-42.‎
صفرپور، م.ح.، و شیخ، م.ج. (1386). بررسی تأثیر دوره سرمایه‌گذاری بر عملکرد شرکت‌های سرمایه‌گذاری پذیرفته‌شده در بورس اوراق بهادار تهران. مجله بررسی‌های حسابداری و حسابرسی، 14، 99-118.
عبده تبریزی, ح. و شریفیان، ر. (2007). بررسی اثر ریسک نامطلوب در ارزیابی عملکرد شرکت‌های سرمایه‌گذاری پذیرفته شده در بورس اوراق بهادار تهران. تحقیقات مالی, 9(24).‎
عزیزی، ش.، و شریف فر، ا. (1392). عوامل تعیین‌کننده انتخاب صندوق‌های سرمایه‌گذاری مشترک: رویکرد پژوهش آمیخته. فصلنامه‌ی مدیریت دارایی و تأمین مالی، 2، 1-7.
فرمان آرا، و.، کمیجانی، ا.، فرزین‌وش، ا.، و غفاری, ف. (1398). نقش بازار سرمایه در تامین مالی و رشد اقتصادی (مطالعه موردی ایران و منتخبی از کشورهای درحال توسعه). مجله اقتصاد مالی، 13(47)، 19-38.
قالیباف اصل، ح.، کردی، م.، و اژدری، ف. (1392). فرااعتمادی مدیران سرمایه گذاری و شاخص های ارزیابی عملکرد صندوق های سرمایه گذاری مشترک. فصلنامه راهبرد مدیریت مالی، 1، 17-34.
کردبچه، ح.، و مال میر، ع. (1391). صندوق‌های سرمایه‌گذاری مشترک. فصلنامه‌ی سیاسی اقتصادی، 288، 174-189.
مشتاق، س.، محسنی، ق.، و سعیدی، ع. (1389). عوامل مؤثر بر بازده صندوق‌های در سهام در بورس اوراق بهادار تهران. فصلنامه‌ی بورس اوراق بهادار، 10، 123-141.
مقدسیان، ا.، و سعیدی، ع. (1389). ارزیابی عملکرد صندوق‌های سرمایه‌گذاری سهام در ایران. فصلنامه‌ی بورس و اوراق بهادار، 9، 5-24.
مرادزاده فرد، م.، حسین پور، ا.، و مولایی نژاد، م. (1394). تأثیر برخی عوامل و ویژگی‌های صندوق‌های سرمایه‌گذاری مشترک بر بازدهی این صندوق‌ها. فصلنامه مدیریت دارایی و تأمین مالی، (2)3، 79-96.
هدایت، م.، شعبان پورفرد، پ., میرلوحی, م. (2020). بررسی عوامل موثر بر تقاضا در صندوق های سرمایه گذاری با تمرکز بر جریانات نقدی. دانش سرمایه‌گذاری, 9(33), 147-162.
Adrian, T., Etula, E., and Muir, T. (2014). Financial Intermediaries and the Cross Section of Asset Returns. Journal of Finance 69, 2557–2596.
Adam, K., Marcet, A., and Nicolini, J. (2016). Stock Market Volatility and Learning. Journal of Finance, 71, 33-82.
Barberis, N., Greenwood, R., Jin, J., and Shleifer, A. (2015). X-CAPM: An extrapolative capital asset pricing model. Journal of Financial Economics, 115(1), 1-24.
Banegas, A., Montes-Rojas, G., and Siga, L. (2016). Mutual fund flows, monetary policy and financial stability. Federal Reserve Finance and Economics Discussion, 71.
Basak, S., & Pavlova, A. (2013). Asset prices and institutional investors. American Economic Review, 103(5), 1728-58.
Ben-Rephael, A., Kandel, S., and Wohl, A. (2012). Measuring investor sentiment with mutual fund flows. Journal of Financial Economics, 104, 363-382.
Bhattacharya, S., and Thakor, A. (1993). Contemporary Banking Theory. Journal of Financial Intermediation, 3, 2-50.
Boehmer, E., and Kelley, E. (2009). Institutional Investors and the Informational Efficiency of Prices. Journal of The Review of Financial Studies, 22)9(, 3563–3594.
Borri, N., and Cagnazzo, A. (2017). The Performance of Market Timing Strategies of Italian Mutual Fund Investors. Journal of Economic Notes, 47(1), 5-20.
Bruno, V., Shin, H. S. (2015). Capital flows and the risk-taking channel of monetary policy. Journal of Monetary Economics, 33-53.
Chien, Y. (2014). The cost of chasing returns. Economic Synopses Federal Reserve Bank of St. Louis, 18.
Chemmanur, T.J., Hu, G., and Huang, J. (2010). The Role of Institutional Investors in Initial Public Offerings. Journal of Review of Financial Studies, 23(12), 4496–4540.
Cochrane, J. H. (2011). Discount rates. Journal of Finance, 66, 1047-1108.
De Galan, J. (2022). MUTUAL FUND PERFORMANCE IN THE NETHERLANDS (Doctoral dissertation Erasmus University Rotterdam, Rotterdam, Netherlands).
De Vita, G., and Kyaw, K. (2008). Determinants of capital flows to developing countries: a structural VAR analysis. Journal of Economic Studies, 35(4), 304-322.
Demiralp, I., D'Mello, R., Schlingemann, F. P., & Subramaniam, V. (2011). Are there monitoring benefits to institutional ownership? Evidence from seasoned equity offerings. Journal of Corporate Finance, 17(5), 1340-1359.
Fama, E., and French, K. (1993). Common risk factors in the return on bond and stocks. Journal of Financial Economics, 33, 3-53.
Fama, E. F. (1999). Efficient markets II. Journal of Finance, 46, 1575-1617.
Fant, L. F. (1999). Investment behavior of mutual fund shareholders: The evidence from aggregate fund flows. Journal of Financial Markets, 2, 391-402.
Fernandez-Arias, E. (1996). The new wave of private capital inflows: push or pull. Journal of Development Economics, 2, 389-418.
Goriaev, A. (2002). On the behavior of mutual fund investors & managers. (Doctoral dissertation, University of Tilburg, Tilburg, Netherlands).
Jank, J. (2011). Mutual fund flows, expected returns, and the real economy. Journal of Banking & Finance, 36(11), 3060-3070.
Koepke, R. (2012). What Drives Capital Flows to Emerging Markets? A Survey of the Empirical Literature. Journal of Economic Surveys, 33(2), 516-540.
Markowitz, H. M. (1952). Portfolio Selection. Journal of Finance, 7(1), 77-91.
Palmiter, Alan R. and Taha, Ahmed E. (2011). Mutual Fund Performance Advertising: Inherently and Materially Misleading? Journal of Georgia Law Review, 46, 289-335.
Piacentino, G. (2013). Do institutional investors improve capital allocation? Working paper, London School of Economics.
Sapp, T., and Tiwari, A. (2004). Does Stock Return Momentum Explain the Smart Money Effect? Journal of Finance, 59, 2605-2622.
Sharpe, W. F. (1964). Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk. Journal of Finance. 19(3), 425-442.
Shleifer, A., and Vishny, R. W. (1986). Large shareholders and corporate control. Journal of Political Economy. 94, 461-88.
Venanzi, D. (2019). The performance of the Italian mutual funds: Does the metric matter? Journal of International Business and Finance, 37, 406-421.
Vidal-García, J., & Vidal, M. (2022). Mutual Fund Flows around the World. Available at SSRN 4072149.
Yiqing Zu, B. (2016). The Role of Mutual Funds in the Real Economy (Doctoral dissertation, University of Melbourne, Melbourne, Australia).
Gyamfi Gyimah, A., Addai, B., & Asamoah, G. K. (2021). Macroeconomic determinants of mutual funds’ performance in Ghana. Cogent Economics & Finance, 9(1), 1913876.
 
Economic Research and Perspectives
Volume 23, Issue 2
Summer 2023
Pages 67-90