Research On The Redemption Of Chinese Open-end Fund

Since September, 2001, Huaan chuang xin was established as the first one, Chinese open-end funds begin to rapidly development and have become the main force exceeding the size of close-ended funds. The open funds rapidly development while facing the phenomenon of ongoing net redemption, even that there is a "redemption Paradox": the higher the growth rate of net value, the higher the redemption rate; some of funds are in the relatively poor performance or even at a net loss, redemption rate has been relatively low. This shows that our fund performance is a reverse to the flow of funds; the good performance of fund managers cannot obtain market incentives so that the moral risks arise, and cannot be helpful to the open-end fund industry competition mechanisms. From a micro perspective, the continuing net redemption of the funds causes the increase of cost control and liquidity risk, affects the asset allocation, is not helpful to create a positive incentive mechanism, and increase the difficulty of the decision-making for fund managers and maybe brings investors a loss. From the macro perspective, the open-end fund net redemption is not conducive to the development of the fund industry and will certainly have an impact on the securities market.This article has a descriptive analysis of open-end fund redemption, and explains the causes of open-end fund redemption through behavioral finance. Based on assumptions of the model, I collect data from 2004 to 2005 on the redemption rate and factors and make empirical analysis. By analyzing I draw some conclusions as follow: (1) An open-end fund no matters which is stock one or debt one, accumulated net value and unit net value are consistent with the hypothesis, to some extent which inhibit redemption showing China's open-end fund in a single indicator does not exactly reflect the "redemption of confusion." However, there is also much difference. The accumulated net growth and the unit net growth of stock funds are relevant with net redemption rate that shows the " confusion of redemption" exits. The debt fund unit net growth is not incorporated in the model showing that current yield has little impact on investors, and the total net growth passes through testing with the trend of a negative correlation, noting investors purchasing and redeeming the debt fund pay more emphasis on long-term yield, which is relative with the mentality of the investors. In dividends, the numbers of the stock fund dividends have negative correlation with redemption rate while dividend payments are not related; partial debt fund dividend times and payments with redemption rate is not very significant. Stock funds show more and more the number of dividends can attract investors to purchase and do good in inhibit redemption, and the amount of dividends on investors will have no appreciable effect. (2) The net value of stock funds negatively correlate with redemption rate while the net value growth rate has passive correlation with net redemption rate. (3) The size of funds is negatively related to the redemption rate, the smaller fund the lower redemption rate. The size of China's open-end fund is beyond 1.5 billion that is a breakthrough and there exits net purchasing. But there are different beyond the scale 20-25 million, there is a net redemption. This may be relative with the lack of sustained marketing strategy. The time fund is set up is conducive to inhibit redemption, but because of the overall shorter time, the impact is not very significant. (4) The holding shares of institutional investors are passively correlated with the redemption and become one of the important factors on redemption. (5) The application of rates and the rate of withdrawal could not become an important factor which discourages investors' redemption. (6) CITIC Standard & Poor's 300 index is negative with the stock fund redemption rate while CITIC bonds are negatively related bond-fund redemption rate. This notes the securities market fluctuations influence redemption, but the regression coefficient is smaller, explain to the redemption rate is little.In the basis of empirical analysis, from the macro perspective on the one hand we should cultivate investors' value investing philosophy, on the other hand provide a favorable macroeconomic environment, increase the transparency of fund management and protect the interests of investors, while gradually increasing investors derivative instruments and providing funds hedge instruments. From a microeconomic perspective, the fund company based on the circumstances should make different policies about the dividends, establish the redemption prediction model. enhance liquidity risk management, and sustain marketing Strategy and design flexible rate structure.