The Moderating Effect of Bank Efficiency and Relationship between Macroeconomic Factors and Mutual Funds Performance

Abstract

The proposed work explores the complex relationships that exist in the current dynamic financial environment between macroeconomic factors, bank performance, and mutual fund performance. The performance of mutual funds is correlated with changes in the macroeconomic environment as they become more important as investment vehicles. This study looks into how bank efficiency affects mutual funds by mitigating the effects of macroeconomic variables. We demonstrate the significance of mutual funds in investment portfolios and the significant impact of macroeconomic variables like inflation, interest rates, and economic growth on their returns through an extensive examination of the literature. Simultaneously, we investigate how bank efficiency contributes to both optimal resource allocation and financial stability. Based on a conceptual framework, we postulate that effective banks may be able to mitigate the negative impact of macroeconomic volatility on the performance of mutual funds. We examine data pertaining to macroeconomic trends, mutual fund performance, and bank efficiency indicators using quantitative techniques and regression analysis. Our empirical research reveals significant correlations between macroeconomic variables and the performance of mutual funds. Specifically, the analysis confirms that bank efficiency has a moderating effect on this link, suggesting that efficient banks may be able to lessen the effect of macroeconomic volatility on mutual fund performance. By shedding light on the interactions between these factors, our research helps investors make sense of the many economic conditions they may encounter. Policymakers also get insightful viewpoints on the advantages of fostering bank efficiency to improve the overall resilience of the financial system. We acknowledge the data availability limitations of the study and suggest more research to investigate subtle moderating effects in other market settings. All things considered, this study clarifies the complex relationships between macroeconomic factors, bank productivity, and mutual fund performance, assisting stakeholders in making better judgments in the constantly changing financial environment.