| This paper focuses on the lottery-type stocks investment behavior of mutual funds.Lottery-type stocks is a kind of stocks whose characteristics are similar to the lottery tickets,that offer a risky investment opportunity at a relative low cost and should the gamble pay off,a high reward as well,investing in lottery-type assets reflects the gambling preference of investors,investors generally spend far more on such assets than they would like,making them extremely risky investments.With the strong speculative atmosphere in China's stock market,a thorough study of investors' lottery-type stocks investment behavior will help us to further clarify the rules of the stock market and the behavior preferences of the participants in the market,which is helpful to the improvement of China's stock market regulatory system.The existing literature mainly focus on the speculative behavior of individual investor,but more and more studies show that institutional investors,especially mutual funds also have speculative preference,for example,excessive pursuit of hot stocks,herd behavior,and so on,which exacerbate the unreasonable risk of fund investors.Obviously,the strong asymmetry between the risk and the return of lottery-type stocks will bring more downside risk to the fund investors.Based on the proportion of the fund's holding of the lottery-type stocks,this paper discusses the main factors that affect the lottery-type stocks holding behavior of actively managed stock funds and stock-oriented hybrid funds in China and the results.This paper adds to the research of the factors that affect the lottery-type stocks holding behavior of mutual funds.Specifically,the paper argues that personal characteristics of fund managers are an important for their preference of lottery-type stocks,including gender,education background and employment experience.While the job anxiety triggered by the performance tournament also matters,fund managers with poor performance may hope to relieve the performance pressure by holding lottery-type stocks.Then the paper analyzes the results of the lottery-type stock behavior of mutual funds,mainly from the perspective of fund performance,risk and fund flow.On the one hand,the paper expands the research on the impact of holding lottery-type stocks on the performance,performance ranking and downside risk of funds with different types and time spans.On the other hand,the paper analyzes the impact of holding lottery-type Stocks on fund flow,and discusses the possible explanation from the perspective of investors' gambling preference,which supplements the related research on the impact of the composition of the fund'sportfolio on investors' investment decisions from the perspective of the holding of lottery-type stocks.After a series of theoretical and empirical analysis,the main conclusions are as follows:First,on the whole,under the performance tournament mechanism,the pressure of performance ranking will lead funds with lower historical performance ranking to hold more lottery-type stocks in their portfolios in the next period.Furthermore,in the year-end,funds with lower historical performance ranking in the middle of the year will hold more lottery-type stocks;compared to bull market,funds with lower historical performance ranking will hold more lottery-type stocks in the bear market.Second,except for past performance,the personal characteristics of fund managers also have a significant impact on the fund's gambling preferences.Based on the results of multiple regression analysis and propensity score matching,this paper finds that individual characteristics of fund managers significantly affect the proportion of lottery stocks in the portfolio.Male or inexperienced fund managers allocate a higher proportion on lottery-type stocks in their portfolios,which is robust under both multiple regression analysis and propensity score matching.In addition,fund managers with higher education background are less likely to invest in lottery-type stocks,especially those with doctoral degrees.However,after controlling for other characteristics of fund managers by means of the propensity score matching method,the influence of educational background is not obvious.Thirdly,the paper analyzes the impact of holding lottery-type stocks on the current and future long-term performance and risk of mutual funds.We find that holding lottery-type stocks has significant positive impact on the current performance of the fund,but has significant negative impact on the long-term performance.At the same time,the paper focuses on the impact of holding lottery-type stocks on the risk of loss,finding that there is no obvious downside risk currently,but in the long run,holding lottery-type stocks has a significant adverse impact on mutual fund's maximum withdrawal and downside risk.Fourth,holding lottery-type stocks has significant positive impact on the following fund flow.Specifically,we find that funds with higher percentage of lottery-type stocks can obtain higher net flow of funds,which still exists after controlling for the most important determinant of fund flow——fund performance.Furthermore,distinguish between the capital inflow and outflow,we find that the requisition scale is more sensitive on the proportion of lottery-type stocks,at the sametime,after distinguishing the performance ranking of mutual funds,we find that for the winners,the proportion of lottery-type stocks has a significant positive impact on the requisition scale,while for the losers,the proportion of lottery-type stocks has no significant impact,but has significant negative impact on the redemption scale.In addition,we also distinguish between different stock market environment,and find that in the bear market,funds with higher proportion of lottery-type stocks can get more capital inflow.The conclusion of this paper has both academic value and practical significance.Academically,the paper analyzes the gambling preference of mutual funds from the perspective of the proportion of lottery-type stocks in their portfolio,which enriches the related research of speculation behavior of mutual funds.In reality,institutional investors,represented by mutual funds,manage huge amount of capital,and the rationality of their investment behaviors are quite important for fund investors.However,the average return of lottery-type stocks is much lower than that of other stocks,which brings higher risk to investors.The paper clarifies the rationality of mutual funds,and provides implications for fund investors when selecting mutual funds,and we also make suggestions for the market regulator to improve the market mechanism. |
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