Abstract
The mutual fund industry plays an imperative role in the financial development of a country. Most of the studies conducted on mutual funds are at micro-level in Pakistan i.e. the researchers mostly found the determinants of mutual fund returns and used traditional method of performance evaluation for the comparison between the different funds. This study used correlation and the Granger causality test to find association and correlation between mutual fund flows, stock market return and the economy. VAR model is used to strengthen the results after endorsing stationary test through ADF test. By using quarterly data from 2006 to 2016, the results suggest that there is a strong positive co-movement between mutual fund flows, stock market return and the economy. The simple Granger causality test reveals that these variables do not Granger cause each other hence cannot be used as predictors; these results are supported by VAR model.
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