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Gold, platinum, and mutual fund flows

Author

Listed:
  • Malik, Ali K.
  • Colak, Gonul
  • Löflund, Anders

Abstract

Huang and Kilic (2019) demonstrate that gold to platinum price ratio (GP), which proxies for tail risk in the economy, is a priced risk factor in the cross-section of stock returns. We document that GP negatively affects the mutual fund flows of the active equity funds. In cross-sectional regressions, we find that funds with high betas with respect to the change in GP (βΔGP) have larger future fund flows, as such funds provide a hedge against economic distress. Further, βΔGP helps predict the future performance of the fund in the next few quarters. βΔGP also relates negatively to the downside risk of the fund, implying that funds could potentially reduce their left-tail risk by tilting towards securities with above average βΔGP. We also examine the flows to active corporate bond funds and passive funds. While these effects of GP are largely observable for passive funds, they are not as strongly observable for corporate bond funds.

Suggested Citation

  • Malik, Ali K. & Colak, Gonul & Löflund, Anders, 2024. "Gold, platinum, and mutual fund flows," Journal of Empirical Finance, Elsevier, vol. 79(C).
    • Handle: RePEc:eee:empfin:v:79:y:2024:i:c:s0927539824000860
    DOI: 10.1016/j.jempfin.2024.101552
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    Keywords

    Gold to platinum price ratio; Mutual funds; Economic distress; Fund flows; Downside risk; Risk-adjusted return;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)

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