THE DYNAMICS BETWEEN MUTUAL FUNDS FLOWS AND STOCK RETURNS: EMPIRICAL EVIDENCE FROM THE TURKEY MARKETS

Abstract

The aim of the study is searching the relationships existence and its directions between investment funds flow and earnings of market stock in Turkey for the period of 2001:4-2011:2. Specifically, we investigate the possibility of a causality mechanism through which mutual funds flows may affect stock returns and vice versa. Time series techniques used for searching this relationship between variances. Primarily to state stagnancy Phillips-Perron unit stem text techniques used, then to state the longer period relationships existence between variances Johansen- Juselius test techniques used. Because of variances are observed as integrated, by considering the possibility of existence at least there is a one way causality between variances, Granger causality test was made. As a result, findings show that there is a relationship between investment funds flow and earnings of market stock by the way there isn’t a causality relationship between investment funds flow and earnings of market stock