The Effect of Capital Market’s Indicators Fluctuations on Russia’s Mutual Investment Funds’ Flows

Abstract

The major participants of world stock markets are mutual investment funds. The flow of private savings into those funds provides for the increase of capital markets liquidity. However, the question arises whether market stability decreases along with in- or outflows to or from equity mutual funds. The industry of pooled investments in Russia has stabilized after explosive growth in early and mid- 2000s. The relative combined asset value of Russia’s funds remain at a substantially lower level compared to developed countries, BRIC and Eastern European countries. This difference cannot be explained by the immaturity of Russian capital market since many of Eastern European capital markets also appeared in last 20 years. One of the reasons negatively impacting the attitude towards the Russia’s capital market in general and equities mutual funds as the easiest mean for personal investments in particular can be high stock market volatility. In order to address these questions this study tests hypotheses of bilateral  effect of stock market indicators and fund flows.