The impact of macroeconomic indicators on equity mutual funds

Abstract

This thesis aims at finding whether equity mutual fund managers react to changes in the macroeconomy by reallocating their funds in diverse industries. To do so, we conducted an asset allocation model, through a Kalman filter, using Fama and French industry portfolios. Among other findings, we found that equity mutual funds increase their allocation towards the consumer goods industry in times of economic uncertainty, managers do not exhibit significant selection skill and equity mutual funds adopt different behaviours depending on their defined strategy. Finally, we could not provide evidence that equity mutual fund managers were able to time the market.