Are Indians really breaking bank deposits to buy mutual funds? Let's run a statistical test
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As the noise around whether Indian households are shifting savings away from low-cost bank deposits to higher-yielding mutual funds grows louder, a statistical exercise fails to show a clear correlation between the two. A time series analysis between mutual funds and bank deposits was conducted by Bank of Baroda economist Dipanwita Mazumdar using Granger causality test and Cointegration regression. The test results show no causality between mutual funds and bank deposits and the other way round as well. "Statistical exercises to show a causal relationship do not lead to concrete results. The variables are not cointegrated as well, under different iterations. A plausible explanation could be that the cycles of MF outweighing BD are transient, and a very recent phenomenon. Besides, both the variables have been growing albeit at differential rates," Mazumdar said. Statistical test results Granger Causality test from FY14-19 and FY2...