Systemic Risk and Mutual Fund

Document Type : Research Paper


1 associate /Tehran University

2 associate /Qom university

3 researcher/ ITSR


The main purpose of this article is to study the transmission of systemic risk from a particular mutual fund to the rest of the mutual funds in Iran Capital Market. Applying the multivariate GARCH model with the Dynamic and constant Conditional Correlation method, we examine the correlation structure of daily net return of the mutual fund portfolios during the period from March 21st, 2011 to March 21nd, 2020. We find the hypothesis of the existence of systemic risk in Iran Capital Market cannot be rejected and the results indicate that the mutual funds are subject to the systemic risk. According to the estimation results of the model, in which Delta δ is significantly positive), it is expected that the conditional correlation among mutual funds to increases following the initial shock in their return series. Also, since the significant Gama coefficient is less than one but very close to it , we could expect long-lasting shocks and persistent uncertainties. The study suggests some managerial solutions for developing a prudential regulation policy to prevent and control systemic risk and to mitigate its effect. Such solution necessitates the establishment of institutions crucial for capital market development, including rating agencies, asset management companies, investment adviser Institutes, and regulation and regulatory agencies as well.


Main Subjects

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