The reaction of value at risk of money market funds to the price behavior of selected banks' stocks
Subject Areas : Financial Knowledge of Securities Analysis
Zeinab keshavarzy
1
,
Ali Baghani
2
*
,
mohsen hamidian
3
,
ghodratollah emamverdi
4
1 - Ph.D Candidate in Financial, Department of Accounting& Finance, Faculty of Management and Accounting, South Tehran Branch, Islamic Azad University, Tehran, Iran
2 - Assistant Prof., Department of Accounting& Finance, Faculty of Management and Accounting, South Tehran Branch, Islamic Azad University, Tehran, Iran. ( Corresponding author)
3 - Associate Prof., Department of Accounting& Finance, Faculty of Management and Accounting& Finance, South Tehran Branch, Islamic Azad University, Tehran, Iran
4 - Assistant Prof., Department of Economics, Faculty of Economics, Center Tehran Branch, Islamic Azad University, Tehran, Iran
Keywords: Value at risk (VaR), vector autoregressive (VaR), stock price, Money market funds (MMF), ,
Abstract :
In recent years, the combination of financial and credit institution crises, along with investors' desire to reduce investment risk, has led to a significant growth in money market funds (MMFs). While money market funds (MMFs) are generally considered to be less risky due to the investment instruments they utilize, it is important to note that there are potential risks associated with these funds. Behind-the-scenes agreements and a lack of proper diversification can amplify the risk of investing in MMFs, particularly in relation to the financial institutions in which these funds have invested. It is crucial for investors to carefully assess the underlying risks and conduct thorough due diligence before investing in MMFs. The objective of this research is to examine the risk contagion structure from banks to money market funds and analyze the cause and effect relationship between the value at risk (VaR) of banks and the VaR of money market funds under their management. The study utilizes a vector autoregressive model (VAR) to analyze the relationships between the VaR values, employing the Granger causality test, impulse response function, and variance decomposition analysis. The findings indicate that, except for the Parsian Bank fund, the other funds lack sufficient diversification. Consequently, shocks in the VaR of banks have an impact on the VaR of the investment units in their respective funds.