Study On Impacts Of Flexible Open-end Mutual Fund On Capital Flows

With the development of China's open-ended funds, it has become a very important force in the stock market. In order to pursue of an advantageous position in the market competetion and to attract investors, fund managers have to differentiate their investment strategies. Differentiated investment strategy promotes the formation of investment style. Meanwhile, with the awareness of risks gradually increasing among the majority of investors, investment experience and lessons make people gradually recognize that it is unreliable to do investment management by only forecasting the asset price, we should focus on the overall portfolio asset quality. The change of investors'understanding on portfolio investment theory shows that the investment style theory has gradually been given due attention in China. Based on these conditions, this article analyzes the current application of the investment style theory in Chinese stock market and the characteristics presented in fund investment style, and discusses the the variation of investment style and its impact on capital flows of the fund.The main body of this paper consists of theory introduction, model building, as well as empirical analysis. In the theory part, the relative theories and studies about fund style variation and capital flow are concluded and summarized. In the model construction and empirical parts:Firstly, the factors affecting the capital flows of the fund are analyzed, and some related factors are selected to build multi-factor analysis model, then the model is to be empirically tested. Secondly, this paper applies the method of rate of return-based style analysis, makes empirical test on 41 preference-stock open-ended funds which have been listed before April,2004, and finds that these preference-stock funds do not present differentiated styles, they are primarily invested in small cap growth stocks. Fund's actual investment style and its declared style are in certain degree of inconsistency, and the fund's actual investment style shows greater convergence. finally, in order to study the factors affecting the fund style variation and its impact on capital flows, we establish dummy variable regression model and logistic regression model respectively, the empirical tests show that size and age of the fund have positive influence on variation of the fund style, and the more worse the fund performs, the more easier the fund style changes. In addition, after changing the style, the open-ended fund does attract capital inflows to some extent.The research of this paper provide a series of empirical support for the promotion of the investment style theory, but it is not enough to promote style investment generally. Besides, this paper makes a breakthrough by studying the impact of variation of fund investment style on the capital flows, which is seldom to be seen in domestic researches.