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The China's Mutual Funds' Investment Strategy Rotation And Volatility Of Stock Market

Posted on:2010-02-21Degree:DoctorType:Dissertation
Country:ChinaCandidate:H T JieFull Text:PDF
GTID:1119360275986663Subject:Quantitative Economics
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This dissertation consists of 4 comparatively self-contained papers devoted to econometric analysis of mutual fund's investment Tactics Rotation in China's stock market. The research presented has been focused on studying threshold panel data model and state space model, and their empirical application for bahavior finance theory to explain investment behavior of China's mutual funds.Firstly , This Chapter three examines the relationship between investment performance and concentration in Chinese stock equity mutual funds portfolios, using the dynamic unbalanced panel data model developed by Bruno. (2005) .Through a panel data model of 95 stock equity mutual funds, the study shows a positive relationship between fund performance and portfolio concentration of stock, but a negative relationship between fund performance and portfolio concentration of industry. I also find funds with better performance tend to be those having smaller aggregate assets and lower turnovers.Secondly, because of the present disclosure requirements, the trade actions of Chinese stock equity mutual funds are unobserved. It strengthens managers' principal-agent behavior of mutual funds and induces more manipulation. This forth chapter estimate the impact of unobserved actions on mutual funds' returns using the return gap, which was defended as the difference between the reported fund return and the return of a portfolio that invests in previous disclosed holding by Kacperczyk, Marcin and Sialm (2006) .Through a panel data model of 30 stock equity mutual funds in China, the study shows a positive relationship between fund returns and return gap of stock during bull market, but a negative relationship during bear market. I also find funds with better return gap tend to be those having smaller aggregate assets and more active investment styles.Thirdly, based on prospect theory provided by Kahneman and Tversky (1979, 1983) , the fifth chapter gives a new explanation on investment style drifting of China's mutual funds. Furthermore, adopting Hansen (1999) threshold panel data econometrical model, we estimate the modified Fama-French (1993, 1997) three factors model. The result shows the mental accounting of mutual funds' manager is not related with their present return, but related with market return adjusted according with their stock equity asset's proportion, which is the reason of investment style cyclical drifting and convergence. The estimation also shows HML index and SML index have different inference on excess return different under different threshold values. It describes the changing cycle difference of value-growth investment style and small-big cap investment style. At last, we brought forward a series of policy suggestion.Morever, behavior finance theory shows investors' risk preference shift under the different market environment. Mutual funds investment style drifting damages the interest of mutual funds' share holders. It also intensifies the volatility of stock market .Because the mutual funds' short-term investment tactics is unobserved. A statistical state space approach is used to estimate the model. Recent algorithms are adopted for the computation of observation weights for forecasting based on state space models. The methodology is illustrated the investment style shifting of China' stock equity mutual funds among different investment styles.Finanly, based on BEKK-GARCH model and structure vector auto regression model, this seventh chapter intends to discover the aggregate relationship between China's stock equity mutual fund and the sock market. The bivariable GARCH model results suggest the two index volitility are highly correlative .The Granger causality test shows the feedback relation of CSI stock fund index and CSI 300 index. The structured VAR empirical results give the restricted estimation pattern. Further, the impulse responses display the stock equity mutual funds enlarge the short-term volatility of the stock market, but in longer term the mutual funds are beneficial to keep the stability of the stock market.
Keywords/Search Tags:Mutual Funds, Investment Strategy Rotation, Behavior Finance Theory, Threshold Panel Data Model
PDF Full Text Request
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