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China Open-end Fund Liquidity Risk And Its Management

Posted on:2005-07-01Degree:MasterType:Thesis
Country:ChinaCandidate:Z Q LiuFull Text:PDF
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Liquidity is a vital factor of security market. The liquidity of secondary market provides investors with chances of transferring,trading securities and raising funds. The increase of market liquidity will not only ensure the operation of financial market, but also effectively accelerate the disposition of resource and the increase of economy. Market liquidity is virtually the asset liquidity of investors. Today, institutional investors' grow stronger day by day. Institutional investor's quality with assets liquidity is the key to guaranteeing the mobility on the whole market. The principle applied to purchase and redeemed at any time of the open-ended fund has determined that the liquidity of the open-ended fund is more important than other institutional investors'. If the mobility of the open-ended fund is not good enough, then it will encounter the sudden redeeming of invenstors, which may cause the downward trend and the mobile forfeiture of the whole market. Open-ended fund in China is now in a high-speed developing period. It has been a main form of operation in our fund industry and has exercised much influence on the security market. The liquidity of open-ended fund is a crucial factor to ensure the liquidity of all markets. So, to probe into the liquidity risk of open-ended fund is very meaningful to the development of our fund industry and our security market.This thesis first discusse the definition and formation of the liquidity risk of the open-ended fund, providing the definition of the open-ended fund and studying the classification of the mobile risk of the open-ended fund and the sources,mechanism of forming of different classes of risks. The liquidity of the open-ended fund is decided by two factors: one is the investment direction of the open-ended fund --National debt and stock, which is the capital source of an open- ended fund when it is redeemed; the other is the liquidity demand of investors of the open- ended fund which cause the flow out of the open-ended fund. So this thesis analyze the characteristics of investors' risks and proceeds and their demand to the open-ended fund, and compare investment behavior characteristics of China and with that of the United States. After studying the phenomenon that the open-ended fund in China had been redeemed on a large scale, this thesis analyses the reason for that. Then through researching on the whole liquidity of investment direction of the open-ended fund --The national debt market and the stock market, conclusion has been made that the exchange bond market of our country and stock market have already possessed better liquidity and the fund caretaker can guarantee the liquidity of fund assets through disposing assets. On the basis of theoretical micro-structure theory of security market, the thesis uses Mann-Whitney U examines ( two independent samples) in SPSS to compare the liquidity index of one close-ended fund and one open-ended fund in the same fund company and draw the conclusion of the open-ended fund assets of our country with insufficient mobility. In the last part, the thesis studies how to keep balance of cash redeemed and cash retained, providing policy recommendations finally.This thesis is divided into four parts:Part one: The definition and formation of open-ended fund liquidity riskThis part starts with the definition of financial asset liquidity and the two kinds of liquidity risk: the market/product liquidity risk and the cash flow/capital risk. On this basis, it points out the definition of open-ended fund liquidity risk and states that the open-ended fund liquidity risk also includes the two above forms of liquidity risk. This part also discusses the formation of open-ended fund liquidity risk. It points out that once the open-ended fund faces liquidity risk, the risk will be larger and larger which is like the risk of "bank run" in the extreme situation. The thesis also divides the liquidity risk of open-ended fund into exogenous liquidity risk and endogenous liquidity risk, states the defin...
Keywords/Search Tags:open-ended funds, liquidity risk, redeem, micro-structure theory of security market
PDF Full Text Request
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