An empirical analysis of the impact of macroeconomic factors on open-end mutual fund prices in Ghana

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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.
Undergraduate thesis submitted to the Department of Business Administration, Ashesi University, in partial fulfillment of Bachelor of Science degree in Business Administration, April 2019
Ghana, mutual funds, investment, macroeconomic variables, exchange rate