Return, Volatility and Equity Fund Flows Linkages: Evidence from an Emerging Market

This study examines the dynamic linkages among market return, market volatility, and equity fund flows of institutional and retail investors both foreign and local into Malaysian Stock Exchange, Bursa Malaysia. Using a total of 1661 daily observations of aggregate trade data for a period from 1st October 2009 to 30th June 2016, this study finds that market return has an effect on buy trades of local investors, sell trades of foreign institutions and local retailer as well as net flows of foreign institutions and retailers. On the equity flows-market return relation, the finding shows that the buy trades of foreign retail investors, net flows of foreign institutions and foreign retailers affect market return. This study also provide evidence that market volatility is significantly impact foreign institutional investors buy trades as well as local retailer net flows of equity. Furthermore, this study reveal that there are insignificant results for the equity flows-market volatility relation. The findings of this study is crucial and will benefit most to portfolio fund managers, traders, foreign and local investors dealing with Bursa Malaysia.