Gold, Platinum, and Mutual Fund Flows

Gonul Colak*, Anders Löflund, Ali Malik

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

Abstract

Huang and Kilic (2019) demonstrate that gold to platinum price ratio (GP), which proxies for the 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 (β_ΔGP), have larger future fund flows, as such funds provide a hedge against economic distress. Further, β_ΔGP helps predict the future performance of the fund in the next few quarters. β_ΔGP 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 β_ΔGP. We also examine the flows to active corporate bond funds and passive funds and show that the above effects of GP are not observable in these funds.
Original languageEnglish
Peer-reviewed scientific journalJournal of Empirical Finance
Pages (from-to)1-48
Number of pages48
ISSN0927-5398
Publication statusSubmitted - 08.12.2023
MoE publication typeA1 Journal article - refereed

Keywords

  • 511 Economics
  • Gold to Platinum ratio
  • Mutual funds
  • Economic distress
  • Fund flows
  • Downside risk
  • Risk-adjusted return

Areas of Strength and Areas of High Potential (AoS and AoHP)

  • AoS: Financial management, accounting, and governance

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