| After the bankruptcy of Lamon Brothers, acquisition of Merrill Lynch Investment Bank, the bankruptcy of American International Group, and changes form former tighter policies to decline in interest rate, stock market suffered a deeper failing. Investors turn to bond market according to the deep failing of stock market and enacting of government polices. Low risk and steady returns make bond fund a harbor for capital. In China, the total scale of new bond funds setting up during the past year is bigger than the total of past five years from 2003 to 2007. With the investors' awareness of risk and the raise of bond market, the total scale of bond funds will keep growing rapidly for a quite long time and receive a great period of opportunity. Different from stock funds, bond funds perform well now, so most investors subscribe bond funds.Because the targets of fund holders and fund managers are different, and information asymmetry exist between them, moral hazard can easily be a problem when fund managers operating. Redemption system was established to solve moral hazard. Establishing redemption system means bringing competition into this market, which make fund managers feel competition press and prevent moral hazard to some extent. It is just this redemption system that make open-ended fund stake the position of close-ended funds as the main stream of fund market. Open-ended funds offer investors the right to redeem their share on net valve, which relieve moral hazard, meanwhile the possible large scale redemption really play an adverse role in fund management. To cope with large scale unpredictable redemption, fund managers must keep large amount of cash, even have to sell assets on a low price, which cause loss of fund net valve. Empirical study finds that fluctuation range of fund cash flow in short term is in negative correlation to fund performance in the future. Being forced to realize assets, open-end funds can intensify market fluctuations and go against market stability. So, it is quite important to prevent large decrease of fund scale. In developed countries, open-ended funds keep a low degree of redemption. However, the redemption degree is very large in China. Because fund investors in China chose to redeem funds with good performance, Open-ended funds in China suffered redemption risk which cannot be ignored.On the basis of former papers, this paper research the redemption of China bond funds from to points of view, both bond investors and bond managers, and give suggestions according to the results.This paper has four sections. The first section is introduction. The second and third sections are the main part of the paper, the forth section is summary.Section one is introduction. This section briefly introduces the present situation of bond market, new government policies to bond market, and the development of bond funds, then shows the importance of research on bond funds.In section two, this paper find factors that reflect bond fund redemption using panel data, and study separately on three styles of bond funds. We find "redemption puzzle" of bond funds in our research and fund scale, fund family scale, situation of bond funds market are other main factors that affect bond fund redemption. Different styles of funds are affected by different factors.In section three, we study the redemption behavior of investors. In this section, we use factor model to estimate funds performance, and prove sustainability of bond funds performance with regression method, Pearson correlation method, Spearman correlation method and chi square test. Then, we use bootstrap to test the reliability of our results.Section four summarizes the whole paper, and gives suggestions according to the results, then points out the weak points of this paper.The main conclusions are as follow:In China, bond funds investors attend to redeem funds with good performance. Investors do not care about volatility of bond funds returns. Investors like large scale bond funds, and perform in convergent way, that is, when they notice some other investors chose to redeem, they will redeem too. Bond funds investors do not like funds from big scale family.Redemption puzzle are a little different among different styles of funds, so as to the factors affect redemption behavior. From style one to style three, investment style becomes more radical, and redemption puzzle becomes bigger. For style one, factors affect redemption of style one are scale of fund and situation of bond funds market. For style two, besides the former factors, investors like specialization of fund family. For style three, extension of bond fund can attract capital, however, extension of fund family go against bond fund.Because bond funds invest in bond market, funds with higher returns gets better performance in factor model. Performance persistence really exists in bond fund market. Conclusions of bootstrap method prove the persistence result is reliable.This paper gives the following suggestions on the basis of conclusions.Bond fund managers should pay much attention on redemption risk, and try to find ways to solve this puzzle. They can expand fund scale to weak redemption press, meanwhile control the scale of fund family. Distributing more returns can reduce fund net value, further more relieve redemption pressure.Different styles of funds should carry on different strategies to cope with redemption puzzle. For bond funds of style one, extension of scale is the best way. For style two, fund managers can expand fund scale and control scale of fund family to cope with redemption puzzle. Managers should divide returns form selling new stocks to investors to relieve redemption causing by high returns. For style three, managers can cope with redemption puzzle by bringing down volatility, controlling scale of bond funds, expanding fund scale.Fund managers should consider setting up new style of bond fund at proper time.Performance persistence exists in bond funds market in China. Redemption behaviors of investors can be considered as irrational.Overall, the major innovation of this paper is the following.First, this paper studies on different styles of bond funds, find that factors affect redemption puzzle are different among them.Second, this paper considers multi-co linearity when analyzing on panel data, which is often be ignored in domestic papers.Third, this paper estimate the performance of bond funds on the basis of former foreign study, and then research on the performance persistence of bond funds. |
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