Empirical Study On The Stock-holding Preferences Of Chinese Open-ended Funds

At present, as the important financing tools in the inland and oversea financial markets because of its advantages, such as combination investment, dispersing risk, professional management and funding conveniently, the investment fund has become the largest institutional investor in the Chinese A share stock-market. The behavior of fund investment on stock market will give a strong influence to China's stock market. Therefore, the empirical study on the holding share partiality of open-ended fund could make the society comprehend the fund, and exert an important influence while selecting stocks on other institutional investors and individual investors. Also it can provide the supervisor the support for making the investment behavior of fund manager standardization to maintain the stock-market developing continuously, healthily and steadily.So, this paper uses the empirical method to examine the holding share partiality of the open-ended fund. Through analyzing the most likely concerned variable related to the prudence of listed company and the shareholding ratio of open-ended fund in the course of selecting stocks, the paper sets up plural regression model. Using Return Law, the text finds the variable of prominent influence on selecting stocks for institutional investors in these twenty-four quarters from quarter 1 of 2002 to quarter 4 of 2007. In order to analyze the different preference of Chinese open-ended funds in holding stock, we test the model in the different market periods.We find that the open-ended funds in China have their own particular preference on holding stocks, and some results support the prudent-man laws on the open-ended funds investment since the level of holding is an increasing function of the firm size, price, exchange-listed and past performance, but others reflect that the nonsupport on the prudent-man laws since the open-ended funds in China like the stocks with lower trading liquidity, higher volatility, higher debt-to-asset ratio and short years on exchange.We also find that during the bearish, the open-ended funds are more likely pay attention to avoid the risk because of the relationship with Beta, PE ratio and profit ratio. And under the surrounding of the bull market, the open-ended funds prefer the stocks with a higher yield on prior period and higher PB ratio.