Macroeconomic determinants of mutual funds performance in Ghana

Abstract

This study examines the impact of key macroeconomic variables on mutual funds’ financial performance in Ghana. We employ the Pooled Mean Group (PMG) estimation of the Autoregressive Distributed Lag (ARDL) model to analyze the macroeconomic determinants of mutual funds in Ghana for the period 2007–2016. The study documents homogenous long-run significant positive impacts of exchange rate, inflation, T-Bill, GDP growth on mutual funds’ financial performance, and a homogeneous long-run negative significant impact of monetary policy rate on the financial performance of mutual funds. The study also establishes heterogeneous short-run respective significant negative and positive impacts of T-Bill and monetary policy on mutual fund’s financial performance. Unlike many previous studies that used stock data to estimate mutual funds’ performance, accounting data is used in this study. Second, we incorporate monetary policy rate in our study variables since most of the prior studies ignored that variable. Finally, the outcome of our study contributes to existing knowledge on the short-run and long-run effects of macroeconomic variables on the financial performance of mutual funds from the perspectives of a developing country.

Keywords:

• Macroeconomic
• mutual fund
• financial performance
• Autoregressive Distributed Lag (ARDL)
• Pooled Mean Group (PMG)

Subjects:

• G1
• G2
• E44

PUBLIC INTEREST STATEMENT

In this study, we employ accounting data of some selected mutual funds in Ghana to determine the macroeconomic determinants of mutual funds performance in the country for the period 2006–2017. Our results show a homogenous long-run significant positive impacts of exchange rate, inflation, T-Bill, GDP growth on mutual funds’ financial performance, and a homogeneous long-run negative significant impact of monetary policy rate on the financial performance of mutual funds. We also find heterogeneous short-run respective significant negative and positive impacts of T-Bill and monetary policy on mutual funds’ financial performance. Based on the findings, we have provided recommendations in this study to help boost mutual funds’ performance in the country.

Additional information

Funding

The authors received no direct funding for this research.

Notes on contributors

Adjei Gyamfi Gyimah

Adjei Gyamfi Gyimah is a consultant and currently works at the German International Corporation (GIZ) in Ghana. He has a lot of teaching and professional experience in Finance.

Bismark Addai

Bismark Addai is a researcher at the School of Economics and Management, Changsha University of Science and Technology in China. His current research interests span across financial economics, environmental economics, agricultural economics, corporate finance, and corporate governance.

George Kwasi Asamoah

George Kwasi Asamoah is a professional financial analyst, and he currently works at the Business Development department of the Frontline Capital Advisors in Ghana.