Investment Patterns in Times of Uncertainty : An empirical analysis of how Norwegian private investors’ fund investment behaviour changes in response to macroeconomic shifts

Abstract

In this thesis, we examine the influence of economic shocks and macroeconomic factors on Norwegian mutual fund investments, such as the policy rate, inflation, and unemployment rate, focusing on the oil price drop between 2014-2016 and the COVID-19 pandemic from 2020-2022. By employing regression analyses, we delve into the changes in investment behaviours against the backdrop of economic shocks and uncertainties, integrating theoretical and empirical literature on savings and investor characteristics. Our analyses reveal that fund type significantly dictated investment preferences, with fixed-income and stock funds attracting substantially more investments than hedge funds. Interestingly, no statistical significance was found for the interaction between the oil price shock and fund types, indicating that this shock did not affect fund investment behaviour as one might have expected. Time-fixed effects, however, revealed a distinct seasonal pattern in investments, with a downturn observed during the middle of the year, potentially a reflection of a “summer slowdown” effect. Moreover, our findings suggest that while investments in funds have been on an upward trend, increasing annually, the anticipated effects of the oil price drop were not evident in the investment data. For the period between 2018-2022, marked by the COVID-19 pandemic, the pandemic’s standalone effect on investment choices was also not statistically significant, contrary to expectations. The included macroeconomic variables did not present statistically significant impacts on fund investments. This research highlights the complexities of mutual fund investments during economic shocks, revealing that broader market trends and investor preferences for fund types may outweigh the direct impacts of macroeconomic disturbances. The insights presented call attention to the nuanced interplay between investor behaviour and economic shocks, offering a foundation for future studies to build upon in the evolving landscape of financial decision-making.