| The first Chinese open ended mutual funds (Hua’An innovation funds) are constructed in2001, and Chinese mutual funds market is receiving a flying development period. At the end of2010, China has61mutual funds management company and manages￥2.3trillion, mutual funds products are more than700, which is the most investment financial instrument in Chinese individual asset allocation besides stocks. Though mutual funds’width, depth and market power are increasing, mutual funds investment return is decreasing. It is statistic by mutual funds management companies’annual reports,61management firms make￥5billion, while management fees is￥30.2billion in2010;64mutual funds company loss￥500.4billion, while earn management fees exceeds￥28.8billion. Investors are facing worse and worse situation, but mutual funds companies are get better and better condition, which is arise academics and practices circles’high attention. The root of this phenomenon is Chinese mutual funds’fixed management system. Mutual funds management companies’aim is enlarge funds’ size to get more management fees, while investors’target is get more return. The objectives of two parts are contradicting, mismatching, thus which cause management companies’serious moral hazard problems.In academic studies, we usually use mutual funds’cash flow to measure funds size changed, and this paper, basic on Chinese capital market characteristic, studies the influence mutual funds cash flow from mutual funds marketing, mutual funds’ managers reaction and so on. This paper is trying to answer the four question:Firstly, how do Chinese mutual funds companies market funds and how does marketing influence funds’cash flow?Secondly, investing funds is really valued, from cost and return views?Thirdly, how does cash flow influence mutual funds’asset allocation and future return?Fourthly, do Chinese mutual funds managers have picking stocks ability? In order to answer these question above, this paper select the answer authority net value data of Chinese stock and partial stock funds from2005to2010, and get the mutual funds marketing data by hand collecting, using many econometrics models, and getting robust empirical results.This paper is organized as follows:Chapter1is introduction. It advances the background and the meaning, then confirms research focus and methods,putting forward basic framework, creative points and shortages,also introduces the content and logic structures of this paper.Chapter2introduces the related literatures, including mutual funds cash flow, funds marketing, funds smart money effect, unobserved, mutual funds payment incentives and mutual funds performance persistence. At last, we do critical views on these papers.Chapter3discusses the relationship between mutual funds marketing and cash flow. As marketing can affect commodity sales, we find that funds marketing have significant effect on funds net cash flows. That is funds with more marketing institutions, marketing nets and marketing experts have more cash inflows. For every10%increase in marketing channels (marketing institutions, nets and experts), the funds inflows go up by1.1-1.6%, meanwhile funds size increases by0.5%. Further analysis indicates that funds with last year low returns will add more new marketing channels. Compared with the profit funds, marketing institution, marketing nets and experts of funds with loss last year will increase more than14-60%.We find that mutual funds marketing will increase funds size; especially, funds with lower performance will strengthen marketing. This result may explain "low return-high fee" phenomenon in Chinese mutual funds market. Compared with developed countries funds market, performance deviate from management fees in the long run in China, which is that funds with high fees will down performance than others. But open ended funds give investors right of voting with feet, if funds loss money, investors would sell it easily. That is contradict to market efficiency theory and it is a discussed problem by researchers that why exiting in market in the long run (Chevalier and Ellison,1997). This paper points that endeavor in marketing increases cash inflow, mutual funds size will maintain. Thus under the fixed management system, low performance funds also can get high fees, showing "low return, high fees"Chapter4we test the relationship of mutual funds compensation and performance. Owing to unchanged funds management fees, we construct a ratio of funs compensation to total management fees, to measure mutual incentive intensity. We find that mutual funds cash flow and compensation is positive correlation, if cash flow increases1%, compensation increases0.1%. Furthermore, we get funds portfolios by compensation-fees ratio, and use Carhart (1997) four factors to adjust portfolios return. We find that high compensation-fees portfolios outperformance than others. Panel data analysis shows that funds with higher compensation-fees, higher future reruns. At last, considering cow market and bear market may get different results, and subprime crisis may also influence market emotion, We dividend two subsample by point2008, Fama and MacBeth (1973) cross-section results show that funds compensation incentive managers overtaking risk in2005-2010, while compensation induce managers control risk, reduce funds net value volatility, which imply that mutual funds managers have power to deal with risk in china.Chapter5studies the "smart money effect" of funds cash flow and future return, using the Chinese open-ended funds data from2005to2010. By constructing funds portfolios and Carhart four factors model, we find that inflows funds portfolios outperformance5-9%excess return, while outflows funds portfolios have not excess return, which confirms that "smart money effect" exists in Chinese funds market. Considering the endogenous of cash flow and future return, forward study applies panel data instruments methods, and we find that cash flow is positive with future return, new cash add by1%, future return grow by0.193%. This paper completes funds "cash flow-future return" study frame and provides the empirical evidence on testing market efficient hypothesis.Chapter6studies under "two ten constraints", the relationships of mutual funds cash flow, investment asset allocation and future performance. So called mutual funds "two ten constraints" is that CSRC (China Securities Regulatory Commission) promulgated a rule, Investment Funds Invest Securities Relevant Business Notification, that one funds must not hold one security excess10%in funds total capital and not excess10%in one stock listing market value, in short "two ten constraints". This paper constructs investment diversification (depth and width), and find that cash flow and diversification is inverse U shaped, managers first increase width and then increase depth. Funds with most diversification outperformance excess return6%than others in one year. Further studies, panel data analysis results show that diversification and funds further return is inverse U shaped correlation. If cash inflow slowly, mutual funds will performance smart money effect; while if cash inflow quickly, which is size effect.Chapter7studies the relationship of mutual funds unobserved action and cash flow. The trading details of the fund are regarded as a black box since the investors could not find out the fund’investment strategies completely through their regularly investment reports. Using the return rate difference of the fund’actual portfolio and the fitting one constructed by this article, we try to estimate the fund’ unobserved trading action and its impact on the fund’yield performance. We find that the more unobserved actions, the higher the excess return the fund earns. In order to solve the endogeneity problem, we use instruments variety methods with panel data to analyze the smart money effect. The results suggest that the larger inflow of the new capital to the fund, the more heavily the fund managers conduct unobserved actions, and therefore the better performance the fund would have in the future.Possible creative points of this paper include:Firstly, by mutual funds marketing strategies, we account for Chinese fund "low return, high fees" phenomenon. Until now, there is few paper studies funds cash flow from marketing view. Compared to overseas market, the most difference of Chinese funds market is that we buy and sell fund in commercial banks, so the convenience, trust and conversation are funds market important points, while specialization, justice of selling instructions is also supervised by CSRC. We firstly study funds marketing influence cash flow, which impose a way to further studies.Secondly, post-subprime crisis, academic circles points that irrational compensation of financial institutions will induce over-risk taking, but there is no empirical results in Chinese financial markets. This paper imposes the evidence for country financial security and risk control. Furthermore, we fill the gaps in Chinese mutual funds studies. Thirdly, in the long run, many researchers devote themselves to study mutual funds momentum and market efficiency. This paper find that smart money effect also exit in Chinese funds market, and smart money effect is influenced by diversification, unobserved action of managers, which completes the frame of "cash flow, mutual funds performance" and impose a new line to further studies.Fourthly, this paper use oversea classical literature for reference study funds managers’selective power. We use bootstrap distinguish the excess return from ability and luck; overcome the weak of un-norms distribution. |
PDF Full Text Request