INTEGRATED RESEARCH DESSERTATION

AN INDEPTH STUDY OF THE

“EFFECT OF MACRO ECONOMIC FACTORS ON MUTUAL FUNDS

PERFORMANCE”

By

Y. Srinath Reddy

DM-05-070

Internal guide:

Mr. Vamsidhar

AURORA’S BUSINESS SCHOOL

Hyderabad
EFFECT OF MACRO ECONOMIC FACTORS ON MUTUAL FUNDS
PERFORMANCE

TABLE OF CONTENTS

INTEGRATED RESEARCH DESSERTATION...............................................................1

Table of Contents...................................................................................................2

Need for choosing this topic

Objectives

Data collection mechanism

Methodology

Expected outcomes

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EFFECT OF MACRO ECONOMIC FACTORS ON MUTUAL FUNDS
PERFORMANCE

Introduction:
The researches is about understanding the behavior of various macro- economic
factors like gross domestic product, inflation rates in the past and study their
effect on funds’ performance by considering both Indian and Unites states
funds.

Need for choosing this topic:

Actually I have done my summer project on creating a portfolio by taking 20
different types of equity stocks. So taking a topic on mutual funds will help me
to get a holistic view of creation and maintenance of a mutual fund, from sip I
understand the creation part of the fund but I would like to understand the
factors that are affecting the performance of the funds.

Objective:
The main objective of the research is to find out the impact of global economic
factors like gross domestic product (GDP), inflation rates and interest rates on
mutual fund performances. The research project is mainly emphasis on
statistical tools like regression, correlation and hypothesis testing etc. Based on
the stastical results one can draw a conclusion to determine up to what extent
the factors will affect the performance.

Statistical objectives:
The main statistical objectives are

Null hypothesis:

Macro-economic factors have no impact on the performance of mutual funds.

Alternate hypothesis:

Macro-economic factors have major impact on the performance of mutual

funds.

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EFFECT OF MACRO ECONOMIC FACTORS ON MUTUAL FUNDS
PERFORMANCE

Data collection mechanism:

The data collected for the research project is mainly through secondary
resource. The required data for the project is historical data (10 years) on gross
domestic product(GDP), inflation rates and interest rates as well as the past
years performance of 5 US & 5 Indian Mutual Funds.

Methodology:
• By calculating the lead, lag and quarterly correlation in between the
mutual fund’s net asset value (NAV) and economic factors, I am able to
understand the relationship in between them.

• By calculating the regression equation in between mutual fund NAV as

one variable, economic factors as other variable and testing it with some
other same category of funds, to find out a regression equation which is
suitable to forecast the performance of fund in future.

Expected outcomes:
• From this research I will understand the individual effect of economic
factors on mutual funds and the combined effect of all economic factors
on mutual fund performance.

• I will learn the hypothesis testing for real time data.

• I will forecast the expected performance of the funds with the help of the
calculated regression equation with minimum error.

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