In spite of the limited evidence about the behaviour of mutual funds in emerging markets, mutual fund investment in these areas has grown markedly over the past decade at a quicker pace than even the developed markets have shown. The growth in mutual fund investment is influential because it shapes the future development in the securities market and has important policy implications. The high proportion of institutional investors creates more timely information and therefore makes the market more efficient. However, it tends also to encourage irrational behaviour, such as herding, which makes the market more volatile. Additionally, the excessive growth.
