| The investors of China's stock market have gradually shifted from institutional investors to small investors, and fund has become one of the most important institutional investors. Meanwhile, the proportion of institutional investors in fund-holders is decreasing while the proportion of individual investors is increasing. Individual investors indirectly invest in the stock market by purchasing fund instead of investing stock directly. Along with the development of institutionalized investment, the growing fund industry becomes an important force in the stock market and the fund flow is increasingly closely linked to the market sentiment.This paper theoretically analyzed the relationship between market sentiment and fund flow firstly, then it did some empirical studies using the data of 106 open-ended funds in 20 quarters. It established VAR model to study the dynamic correlation between market sentiment and the overall net flow of open-ended funds, it also set up factor equations of classified fund and single fund separately by analyzing panel data. And we got the results as follows:1. Market sentiment has significant positive effect on the fund flow. The analysis on fund flow of general fund, classified fund and a single fund all demonstrate that market sentiment has significant positive effect on the fund flow.2. Disposition Effect is present in Chinese fund investors. The research on fund flow of general fund and a single fund all demonstrate that disposition Effect is present in Chinese fund investors.3. This paper verifies the positive dealer feedback hypothesis in China's fund market. There is a positive correlation between stock market returns and net flows of a single fund; stock market returns do not affect the fund flow of classified fund.4. There exists herding effects in the investment behavior of the fund market. The research finds that there is a herding behavior of fund investors in the purchase and redemption of general fund and a single fund. |
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