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Leaders and followers in mutual funds: A dynamic Bayesian approach

Author

Listed:
  • Laura Andreu
  • José L. Sarto
  • Pilar Gargallo
  • Manuel Salvador

Abstract

This article proposes a dynamic Bayesian framework to analyze the leadership relationships between mutual funds. To this end, a two‐step procedure is proposed. First, a Bayesian rolling window based on the Capital Asset Pricing Model is used to estimate the evolution of mutual funds' market exposure over time. Then, a vector autoregressive (VAR) model is used to analyze the leader‐follower relationship between pair of mutual funds. Several leadership measures are studied. An application to Spanish mutual funds is carried out. In addition, the study examines the determining factors of mutual fund leadership.

Suggested Citation

  • Laura Andreu & José L. Sarto & Pilar Gargallo & Manuel Salvador, 2020. "Leaders and followers in mutual funds: A dynamic Bayesian approach," Applied Stochastic Models in Business and Industry, John Wiley & Sons, vol. 36(4), pages 679-695, July.
    • Handle: RePEc:wly:apsmbi:v:36:y:2020:i:4:p:679-695
    DOI: 10.1002/asmb.2524
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    References listed on IDEAS

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