China's Stock And Partial Shares Of Open-end Fund Of Funds Net Inflow Of Impact Factors Research

The buying and redeeming of open-ended mutual fund make the size of its asset uncertain. This uncertainty not only presents portfolio management and risk management challenges to the fund manage, but also triggers buying or selling by the fund, which, through its strong influence to the market, transmit price volatility to the whole market, and increase market volatility. In sum, the net cash inflow into open-ended mutual fund brought by buying and redeeming has important influence to both the survival and development of the fund and the stableness of the market.This article attempts to study the factors influencing the net cash inflow into open-ended equity mutual funds in China.Based on the combination of related facts and the theory of asset allocation and transaction costs, the article proposes several possible factors: from former theory, risk-adjusted returns of the fund and the market, dividend of the fund, and from latter theory, the fund's net asset and its rank of its net asset return.Then two empirical panel data models are built in the respective perspectives of the two theories. With data from a cross-section of 38 funds and a time period of 17 quarters, regression is conducted and the following conclusion is drawn: from the perspective of asset allocation, firstly, the "disposal effect" of investors far outweighs their desire to pursue predicted return implied by historical prices, resulting in investors' preference to redeem funds with better performance and fewer dividends. This mirrors the immaturity of Chinese investors and the irregularity of the Chinese stock market. Secondly, the performance of the market is positively related to net cash inflow. From the perspective of transaction costs, it is proved that funds with higher ranks and larger net assets will attract more net cash inflow. This is an indirect proof that funds that are more famous or spends more on advertising or sales channel will attract more net cash inflow.Last, based on the result of the analysis, the article proposes several policies in order to improve China's open-ended mutual fund industry: enhance investor education and further regulate the market, use dividends to attract more net cash inflow, be aware of systematic risk and reduce transaction cost of the mutual fund market.