An empirical analysis of the impact of macroeconomic factors on open-end mutual fund prices in Ghana
Date
2019-04
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Abstract
It is conventional knowledge that changes in macroeconomic risk factors have
significant impact on the capital markets (Bali, Brown & Caglayan, 2014). Mutual funds
primarily invest in the capital markets (Fairley, 1999); hence it is expected that these
systematic factors will have a bearing on their prices. The nexus between macroeconomic
factors and mutual funds have been explored extensively for developed markets (Marfo,
2017; Ansong, 2013), however, the evidence is weak for frontier markets like Ghana. The
lack of compelling evidence for Ghana is inconceivable as it is a very critical relationship
especially for emerging and frontier markets due to their massive response to changes in
macroeconomic policy (Muradoglu, Taskin and Bigen, 2000). To fill this gap, this study
empirically investigates the relationship between macroeconomic factors and mutual fund
prices in Ghana.
Based on the literature, macroeconomic variables considered for the study are
quarterly data on interest rates, inflation rates, exchange rates, broad money supply (M2)
and real GDP covering the period from 2007 to 2017. This study uses a short-run
Autoregressive Distributed Lag model to estimate the relationship. The study reveals that
interest rates, inflation rates, money supply and real GDP are insignificant determinants
of variations in mutual fund prices. The lagged values of fund prices and exchange rates
were found to be the significant determinants of mutual fund prices in Ghana. A plausible
reason for this result is that the Ghanaian mutual fund industry has failed to price in risks
emanating from changes in interest rate, inflation and money supply variations.
Description
Undergraduate thesis submitted to the Department of Business Administration, Ashesi University, in partial fulfillment of Bachelor of Science degree in Business Administration, April 2019
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Keywords
Ghana, mutual funds, investment, macroeconomic variables, exchange rate