A Reasearch On Open-End Fund Performance And Fund Flow

The open-end funds in our country have experienced more than ten years of rapid development.As a result the market has gained a certain scale for individuals and institutions to conduct asset management.However,there are still some problems and challenges facing by the participants.Especially when the stock markets went through a great up and down change in 2015,the open-end fund market was also shocked by this trend.A lot of changes have taken place in both fund size and fund performance.Base on this background,the article chooses open-end fund performance and fund flow as the research topic,aiming at helping participants to know more about the value and risk of fund investment,better understand the main factors influencing the investors behaviour,and furthermore to figure out the interconnections between fund market and external market.The early study of portfolio return and investment risk carried out overseas since 1950 s.Until 1990 s the researchers started to pay attention to the flow-performance relationship of mutual funds.Researchers have made progress in both theoretical and empirical study of linear and nonlinear flow-performance relationship.But the domestic research still confined to the linear relationship study.There is little research taken on the convexity and asymmetric relationship between performance and fund flows.Also the empirical analysis of the factors affecting fund flows concentrates on historical performance,but ignores the influence from the external environment.Besides whether the fund flow has externality is still unknown.The research questions on the one hand came from the niche of domestic literatures,on the other hand based on the changing situation of fund market.In the view of fund performance and fund flow study,the object is to find out ins and outs influence of investor's behavior.Along with this thought,the main research contents and conclusions are as follows:First,the article studied fund performance evaluation,risk measurement and risk return trade-off indices,and then calculate the risk-adjusted returns of different styles of funds by three-factor and four factor model regression.The empirical results show that momentum factor is positively related to the good fund performance and is negatively related to the poor fund performance.Next,following the active investment model theory,further analysis of the performance persistence is implemented using both the absolute return and risk-adjusted return measures.It has been proved that persistence of the absolute performance doesn't exist with one-year standard.Three-factor risk adjusted return only shows persistence in the poor-performance funds.However this effect would disappear after using four-factor model,which illustrates momentum effect may be the cause of the poor-performance persistence.The study of dividend-adjusted fund flow measurement improves the validity of the data estimation.After that the influence factors of fund flow are analyzed from both macroscopic and microscopic perspective.The results show that the equity fund flow is positively influenced by the stock market return and the return volatility.Meanwhile,macro economic index and investor sentiment have positive impact to the equity fund flow.The empirical results also show that the rise of stock market return has a positive role on improving the bond fund flow and hybrid fund flow.In addition,a study is taken separately on the fund inflow and outflow to capture the asymmetric relationship,which illustrates that the sensitivity of inflow response is larger than that of outflow and young-age funds have more inflow and outflow than the old ones.Not only that,in the study of fund flow spillover effects,the cash inflow of new fund is found to be the main cause to the increasing fund flow in recent years.A direct result is the interaction between the stock market and fund market.The rising return of stock market draws more cash inflow of the new founded fund,and in reverse the cash inflow would cause more volativity of the stock market.This paper also found that fund flow has the smart money effect in a short term.As the fund flow increases by 1%,fund return will increase 4 basis points averagely in the next quarter.These empirical results bring several enlightenments to the participants of open-end fund market.First of all,as fund performance has a positive feedback effect to investors' choice,the fund managers should pay more attention to risk management and the value of the investment.Second,the regulators should pay more attention to the interaction effect of fund market and external environment.Moreover,the number of the new issued fund should be under the rational guidance and effective regulation to avoid causing unexpected volatility to the stock market.Finally,the fund investors should improve the investment skill and risk awareness because the fund performance is not sustainable in the long run.It is shown that growth-funds and value-funds have better risk-adjusted return.