| Along with the rapid development of the capital market, the influence of funds is so obvious that more and more investors choose funds as their instrument of investment, which causes a lot of scholars' studies about funds. As to the trading cause of the funds investors, though there are already some studies overseas, few studies are founded in our country. This paper will make an empirical study of the problem, and I expect it'll help to understand the Chinese investors' trading cause further.There are three main explanations of the trading cause. The first is that there is "smart money" effect, that is, investors have an ability to identify superior managers and invest accordingly. The second is that there is no "smart money" effect, but investors know "momentum effect", and they chase funds with momentum styles to gain excess return. The third is that investors have no selection ability, either, and they just chase those funds that have recent large returns.This study uses a sample that includes the funds existing before 2004, and uses statistics software SAS for the empirical study.Firstly, I explore whether there is "smart money" effect when investors invest funds by using a one-factor model, a Fama-French three-factor model and a Carhart benchmark model that includes the three Fama-French factor and a momentum factor respectively. The result is that in our country there is no "smart money" effect when using the three models and the long-short strategy, in which one buys the positive portfolios and sells the corresponding negative portfolios.Then I examine what determines the investors' cash flow. Except for the factors of the funds' near return and the UMD loading, I still add some other factors such as the size of funds, the net cash flow from the prior period and related fees of funds. My findings suggest that investors are chasing past returns, UMD and near cash flow of funds, and other factors have no obvious influence on the investors' cash... |
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