The Impact of Macroeconomic Variables on Mutual Funds Performance in Ghana

Authors

  • Cai Li  School of management, Jiangsu University, Zhenjiang, P.R. Chin
  • Rosemond Atampokah  School of management, Jiangsu University, Zhenjiang, P.R. China
  • Helena Akolpoka  Business School, University of Ghana, Accra, Ghana
  • Priscilla Avonie  Business School, University of Ghana, Accra, Ghana
  • Baku R. Kwame  School of Finance and Economics, Jiangsu University, Zhenjiang, P.R. China

DOI:

https://doi.org/10.32628/IJSRSET218213

Keywords:

Macroeconomics, mutual fund, performance, Inflation, Ghana Stock Exchange, Bank of Ghana.

Abstract

Development across the globe has been an agenda many citizens of the world champion irrespective of the area, sector or discipline within which it is being advocated. Politically, socially, and in the world of economics, mutual fund has gained significance within country’s economic environment. The phenomenal growth in the financial market of mutual funds can be attributed to the increase in the various financial schemes available, improvement in fund mobilization, as well as the growth of investments in the country. We examined the impact of macroeconomic variables on mutual fund performance of all mutual fund companies in Ghana over the period of 2008 to 2016. We performed correlation analysis, hence examined the co-movement of the returns from the selected funds with the key macroeconomic variables. We find macroeconomics variables positively affect the returns of funds. The effect comes by the amount of money available for investments. We further find exchange rate as the strongest macroeconomic variable affects the performance of mutual funds in Ghana. We established that Ghana receives a significant amount of foreign portfolio investment (FPI), where investors in other countries bring in their money to make investment on our financial markets. Our results provide evidence for fund managers on approach in dealing with macroeconomic conditions and its volatilities.

References

  1. Adam, A., & Tweneboah, G. (2008). Macroeconomic factors and stock market movement: Evidence from Ghana.
  2. Adler, M., & Dumas, B. (1984). Exposure to currency risk: definition and measurement. Financial management, 41-50.
  3. Alam, M., & Uddin, G. (2009). Relationship between interest rate and stock price: empirical evidence from developed and developing countries.
  4. Ali, I., Rehman, K. U., Yilmaz, A. K., Khan, M. A., & Afzal, H. (2010). Causal relationship between macro-economic indicators and stock exchange prices in Pakistan. African Journal of Business Management, 4(3), 312-319.
  5. Amunga, P. I. (2015). Factors Affecting Performance of Mutual Funds in Kenya (Doctoral dissertation, University of Nairobi).
  6. Bekaert, G., &Engstrom, E. (2010). Inflation and the stock market: Understanding the “Fed Model”. Journal of Monetary Economics, 57(3), 278-294.
  7. Beenstock, M., & Chan, K. F. (1986). Testing the arbitrage pricing theory in the United Kingdom. Oxford Bulletin of Economics and Statistics, 48(2), 121-141.
  8. Bia?kowski, J., &Otten, R. (2011). Emerging market mutual fund performance: Evidence for Poland. The north american Journal of economics and finance, 22(2), 118-130.
  9. Bodie, Z., Kane, A., & Marcus, A. (2010). Investments, 9th ed.
  10. Boudoukh, J., Richardson, M., Subrahmanyam, M., & Whitelaw, R. F. (2002). Stale prices and strategies for trading mutual funds. Financial Analysts Journal, 58(4), 53-71.
  11. Brinson, G. P., Singer, B. D., &Beebower, G. L. (1991). Determinants of portfolio performance II: An update. Financial Analysts Journal, 47(3), 40-48.
  12. Chen, N. F., Roll, R., & Ross, S. A. (1986). Economic forces and the stock market. Journal of business, 383-403.
  13. Chen, Y., & Qin, N. (2016). The behavior of investor flows in corporate bond mutual funds. Management Science, 63(5), 1365-1381.
  14. Cheung, Y. W., & Ng, L. K. (1998). International evidence on the stock market and aggregate economic activity. Journal of empirical finance, 5(3), 281-296.
  15. Chevalier, J., & Ellison, G. (1997). Risk taking by mutual funds as a response to incentives. Journal of Political Economy, 105(6), 1167-1200.
  16. Dash, M. (2008). A study on the effect of macroeconomic variables on Indian Mutual Funds.
  17. Dudwick, N., Kuehnast, K., Jones, V. N., &Woolcock, M. (2006). Analyzing social capital in context. A guide to using qualitative methods and data.
  18. Elton, E. J., & Gruber, M. J. (1988). A multi-index risk model of the Japanese stock market. Japan and the World Economy, 1(1), 21-44.
  19. Fama, E. F., &MacBeth, J. D. (1973). Risk, return, and equilibrium: Empirical tests. Journal of political economy, 81(3), 607-636.
  20. Fortin, R., & Michelson, S. (2005). Active international mutual fund management; can managers neat the index?. Managerial Finance, 31(1), 41-51.
  21. Bondzie, E. A., Fosu, G. O., &AsareOkyere, G. (2014). Does Foreign Direct Investment really affect Ghana’s Economic Growth?.
  22. Frimpong, J. M., &Oteng-Abayie, E. F. (2010). When is inflation harmful? Estimating the threshold effect for Ghana. American Journal of Economics and Business Administration, 2(3), 232.
  23. Gay, R. D. (2016). Effect of macroeconomic variables on stock market returns for four emerging economies: Brazil, Russia, India, and China. The International Business & Economics Research Journal (Online), 15(3), 119.
  24. Goetzmann, W. N., & Ibbotson, R. G. (2006). The equity risk premium: essays and explorations. Oxford University Press.
  25. Groenewold Fraser, N. P. (1997). Share prices and macroeconomic factors. Journal of Business Finance & Accounting, 24(9?10), 1367-1383.
  26. Humpe, A., & Macmillan, P. (2009). Can macroeconomic variables explain long-term stock market movements? A comparison of the US and Japan. Applied Financial Economics, 19(2), 111-119.
  27. ICI, (2008) Mutual Fund Fact Book, Washington, D.C.: Investment Company Institute.
  28. Miller, K. D., Jeffrey, F. J., &Mandelker, G. (1976). The “Fisher effect” for risky assets: An empirical investigation. The Journal of finance, 31(2), 447-458.
  29. Jawaid, S. T., &UlHaq, A. (2012). Effects of interest rate, exchange rate and their volatilities on stock prices: evidence from banking industry of Pakistan. Theoretical & Applied Economics, 19(8).
  30. Jensen, M. C. (1968). The performance of mutual funds in the period 1945–1964. The Journal of finance, 23(2), 389-416.
  31. Kaneza, C. (2016). Factors Affecting the Financial Performance of Commercial Banks Listed on the Nairobi Securities Exchange (Doctoral dissertation, United States International University-Africa).
  32. Kariuki, E. C. (2014). Effect of Macroeconomic Variables on Financial Performance of Mutual Funds Industry in Kenya. school of business, university of nairobi.
  33. KUNG’U, N. D. (2013). The effect of selected macroeconomic variables on the financial performance of private equity firms in Kenya. Unpublished MBA Project, University of Nairobi.
  34. Lemantile, A. L. (2017). Effects of Macro-Economic Factors on the Financial Performance of Mutual Funds in Kenya (Doctoral dissertation, United States International University- Africa).
  35. Lintner, J. (1975). The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets. In Stochastic Optimization Models in Finance (pp. 131- 155).
  36. Lu, G. M., Metin IV, K., &Argac, R. (2001). Is there a long run relationship between stock returns and monetary variables: evidence from an emerging market. Applied financial economics, 11(6), 641-649.
  37. Mainga, S. (2014). Effect of Macro-Economic Factors on Stock Returns at the Nairobi Stock Exchange (Doctoral dissertation, United States International University-Africa).
  38. Marfo, K. N. (2017). The performance of mutual fund in Ghana: a case study of Anidaso Mutual Fund (Doctoral dissertation).
  39. Markowitz, H. (1952). Portfolio selection. The journal of finance, 7(1), 77-91.
  40. Monjazeb, M., &Ramazanpour, E. (2013). The Effect of Economic Factors on The Efficiency of Mutual Funds in Iran SeyedehJavaneh Ahmadi Tulamy. Technical Journal of Engineering and Applied Sciences, 3(15), 1707-1711.
  41. Mossin, J. (1966). Equilibrium in a capital asset market. Econometrica: Journal of the econometric society, 768-783.
  42. Oehler, A., Pukthuanthong, K., Rummer, M., & Walker, T. (2007). Venture capital in Europe: closing the gap to the US. In Venture capital in Europe (pp. 3-17).
  43. Olweny, T., &Omondi, K. (2011). The effect of macro-economic factors on stock return volatility in the Nairobi stock exchange, Kenya. Economics and Finance review, 1(10), 34-48.
  44. Özlen, S., & Ergun, U. (2012). Macroeconomic factors and stock returns. International Journal of Academic Research in Business and Social Sciences, 2(9), 315.
  45. Qi, M., &Maddala, G. S. (1999). Economic factors and the stock market: a new perspective. Journal of Forecasting, 18(3), 151-166.
  46. Ramey, G., & Ramey, V. A. (1994). Cross-country evidence on the link between volatility and growth (No. w4959). National bureau of economic research.
  47. Reilly, F. K., & Brown, K. C. (2011). Investment analysis and portfolio management. Cengage Learning.
  48. Ross, S. A. (1976). The arbitrage theory of capital asset pricing, ?Journal of Economic Theory?.
  49. Sajjadi H., Azar A., Farazmand H., Ali Sofieh H. (2010) Examining the relationship between macroeconomic variables and Tehran securities stock exchange price index. Accounting Studies, No.6.
  50. Samadi, S., Bayani, O., &Ghalandari, M. (2012). The relationship between macroeconomic variables and stock returns in the Tehran stock exchange. International Journal of Academic Research in Business and Social Sciences, 2(6), 559.
  51. Saunders, M., & Lewis, P. (2016). In Thornhill Adrian. Research methods for business students, 7.
  52. Sharpe, W. F. (1964). Capital asset prices: A theory of market equilibrium under conditions of risk. The journal of finance, 19(3), 425-442.
  53. Sharpe, W. F. (1966). Mutual fund performance. The Journal of business, 39(1), 119-138.
  54. Sinclair, N. A. (1984). Aspects of the factor structure implicit in the Australian industrial equity market: February 1958 to August 1977. Australian Journal of Management, 9(1), 23-36.
  55. Singh, T., Mehta, S., &Varsha, M. S. (2011). Macroeconomic factors and stock returns: Evidence from Taiwan. Journal of economics and international finance, 3(4), 217-227.
  56. Siqueira, E. M. R., de Carvalho, A. G., &Netto, H. G. (2011). Determinants of Success in Private Equity-Venture Capital Investments. Brazilian Review of Finance, 9(2), 189-208.
  57. Smirlock, M., &Yawitz, J. (1985). Asset returns, discount rate changes, and market efficiency. The Journal of Finance, 40(4), 1141-1158.
  58. Tieku, E. (2016). An examination of the effect of macroeconomic variables on Ghana stock market returns in Ghana (Doctoral dissertation).
  59. Tobin, J. (1958). Liquidity preference as behavior towards risk. The review of economic studies, 25(2), 65-86.
  60. Tursoy, T., Gunsel, N., &Rjoub, H. (2008). Macroeconomic factors, the APT and the Istanbul stock market. International Research Journal of Finance and Economics, 22, 49-57.
  61. Yauch, C. A., &Steudel, H. J. (2003). Complementary use of qualitative and quantitative cultural assessment methods. Organizational Research Methods, 6(4), 465-481.

International Journal of Scientific Research in Science, Engineering and Technology

Downloads

Published

2021-04-30

Issue

Volume 8, Issue 2, November-December-2021

Section

Research Articles

License

Copyright (c) IJSRSET

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

How to Cite

[1]
Cai Li, Rosemond Atampokah, Helena Akolpoka, Priscilla Avonie, Baku R. Kwame "The Impact of Macroeconomic Variables on Mutual Funds Performance in Ghana" International Journal of Scientific Research in Science, Engineering and Technology (IJSRSET), Print ISSN : 2395-1990, Online ISSN : 2394-4099, Volume 8, Issue 2, pp.34-53, November-December-2021. Available at doi : https://doi.org/10.32628/IJSRSET218213