The Research On The Liquidity Risk Of Open-end Funds In China

This article is about the liquidity risk of open-end fund based on the view that the behavior of holders' redemption causes the liquidity risk of open-end funds in China. Because its shares can be redeemed, the open-end fund has to face the great liquidity risk. The liquidity risk of open-ended fund origins from the contradiction between the liquidity and return of the fund's asset. In developed capital market, such as USA mutual funds market, the degree of the liquidity risk is related with the factors such as: the returns , the investment strategy , the investment ability or reputation of the manager, the structure of mutual fund charges, the return of the stock market index, and so on.Because the Chinese capital market is a developing market, there are many factors that increase the open-end funds' liquidity risk, such as the small market capacity, the high cost of transferring, the unreasonable market structure, the lack of short sale system, and so on. It describes the high liquidity risk of open-ended fund in china through the empirical study on the performance of Chinese open-end funds. And we believe that the high liquidity risk of Chinese open-end funds is related with the return of fund, the investment strategy, the investment ability or reputation of the manager and other factorsFinally this article suggests some countermeasures to prevent the liquidity risk of open-end fund. First, we shall strengthen the liquid management of funds; Second, we shall improve the internal factors of funds, such as raise the return of funds, develop better product, design good structure of fund charges; Third, we shall create a favorable external environment for open-end funds to avoid risk, such as allow short sell, improve the quality of listed companies, and strengthen the supervision on the trustees.