Research On Open-ended Fund Investor Flow And Its Effect On Portfolio

Mutual fund flow which estimates the investors' behavior is one of the influncing factors to the fund investment. Mutual fund flow at the individual fund level has been shown to affect the returns earned by the fund's owners, and a approach to the problem is by means of affecting mutual fund portfolio trading.Firstly by theoretic analyzing we find the investors'redemption behavior is the dominating factor which places a premium on the open-funds' liquidity risk. It also plays one of the influencing roles which causing the dynamic change of open-funds' portfolio. Furthermore, the investors' redemption is a variable of the fund flow.,thus the mutual fund flow will affect the mutual fund portfolio trading. Secondly the article analyzes how the mutual fund flow influences it, including three aspects of triggering liquidity-motivated trading, the change of the mutual fund portfolio structure and higher transaction costs.The demonstration is divided into two parts including the effects on total assets and single asset (stocks and bonds)in the fund portfolio.Then with this understanding I design three situations to prove the possible effect, including mutual fund total flow,mutual fund unanticipated total flow and single unanticipated mutual fund flow variable. There are the results:①The results find that this liquidity-induced portfolio trading activity which triggered by investor flows into and out of the funds, is surely existed in our fund market. The inflows will force the fund managers purchasing stocks and bonds, vice versa.Thereinto, especially the trades of bonds are distinct which implies managers' better favour on the safe and steady assets.②And the anticipated mutual fund flow surely plays an important role in counteracting a part of the effect in fund's portfolio from the investors' redemption behavior and then keeping the open-funds' liquidity risk away.③Finally, the so called investors' hysteresis can not be found in our fund market because there is few investors choosing mutual fund flow as the only index to select fund. However, fund managers seem to adjusting the portfolio proportion of bond assets based on the former fund flows sometimes.