Empirical Research On The Stock-holding Preferences Of Chinese Equity Open-ended Funds

At present, as the important financing tools in the inland and oversea financial markets because of its advantages, such as combination investment, dispersing risk, professional management and funding conveniently,the investment fund has become the largest institutional investor in the Chinese A share stock-market. The behavior of fund investment on stock market will give a strong influence to China’s stock market. Therefore, Increase the society understanding of the equity open-ended funds, and exert an important influence while selecting stocks on other institutional investors and individual investors. Also it can provide the supervisor the support for making the investment behavior of fund manager standardization to maintain the stock-market developing continuously, healthily and steadily.So, this paper uses the empirical method to examine the holding share partiality of the equity open-ended funds. Through analyzing the most likely concerned variable related to the prudence of listed company and the shareholding ratio of equity open-ended funds in the course of selecting stocks, the paper sets up plural regression model. Using Return Law, the text finds the variable of prominent influence on selecting stocks for institutional investors in these twenty quarters from quarter1of2007to quarter4of2011. In order to analyze the different preference of Chinese equity open-ended funds in holding stock, we test the model in the different market periods.We find that the equity open-ended funds in China have their own particular preference on holding stocks, and some results support the prudent-men laws on the equity open-ended funds investment since the level of holding is an increasing function of the firm size, P/E Ratio and the extent of information disclosure, but others reflect that the nonsupport on the prudent-man laws since the equity open-ended funds in China like the stocks with lower trading liquidity, higher debt-to-asset ratio and short years on exchange. We also find that during the bearish, the equity open-ended funds are more likely pay attention to avoid the risk because of the relationship with Beta, PE ratio and profit ratio. And under the surrounding of the bull market, the equity open-ended funds prefer the stocks with a higher yield and higher PB ratio.Finally, we found that our equity open-ended fund has developed rapidly, but many questions remain. We have concluded that, the stock-holding preferences of equity open-ended funds in some part, followed the "prudent person" principle, but for various reason, the stock-holding preferences of equity open-ended funds, in other areas did not follow the "prudent person" principle well, to a certain extent, this may harm the interests of small investors, and is not conducive to China’s fund industry continued and stable development, and thus may pose a threat to the healthy and stable development of China’s securities market. Based on this, we propose some policy recommendations from more than point of view of equity open-ended fund, listed companies, individual investors and government regulators, and we hope these suggestions will make China’s fund industry to be more standardized and healthy development.