The Empirical Study On Liquidity Risk Of Open-end Funds In China

The biggest difference between Open-end funds and closed-end funds is that the scale of open-end funds is not fixed, investors can purchase and redeem the fund shares constantly on the base of their judgments, as a result the liquidity risk of open-end funds increases greatly and investors have absolute right to weigh the risks and benefits of the funds. Because of the advantage, open-end funds become much more welcomed, have developed to be the main part of funds industry in China. But open-end funds in every country face a dilemma that is liquidity risk because of this open-end operating method. When redemption of open-end funds shares, especially huge redemption accrues, it's difficult for funds managers to sell the assets at fare price in short time, this would cause loss (financial). Therefore the existence of liquidity risk threats the development of open-end funds in China greatly, especially when securities market in China is not standardized, the investment philosophy is not yet rational and the level of funds management is low, open-end funds would face much higher liquidity risk, so how to resolve liquidity risk of open-end funds becomes one of problems which need to be resolved as soon as possible.This paper on the base of development situation and characteristics of open-end funds in China has researched empirically on liquidity risk of open-end funds in China in reference with domestic and international researches. This paper selects 36 open-end securities-investment funds which were established before 2005 as samples, uses the designed liquidity risk indicators to calculate the liquidity risk of portfolios and redemption, and ranks them by measurement results separately. Finally on the base of the analysis and empirical results, this paper builds a management system of liquidity risk of open-end funds in China.