Market States And Fund Investors’ Redemption Behavior

In this article, we use quarterly information as our data which period is from2006to2012to do empirical researchon the redemption behavior of Chinese open-ended equity fund investors.Compared to the past papers which explored the redemption behavior of Chinese fundinvestors.This article is not only to separate different levels of win (extreme win, moderate win)and loss (moderate lose, and extreme lose), but also further studied that whether the redemptionbehavior of fund investors will do different types of behavior in different market conditions.The results of this article show that, when fund investors face different levels of win andloss, it will certainly do different type of redemption behavior in different market conditions. Forexample: in bullish market, extreme winners possess the house money effect–more reluctant toredeem the winner; in range bound market, moderate losers possess the inverse dispostioneffectof enthusiastically redeem the moderate loser; in bullish market, moderate lossers possessthe disposition effect–reluctant to redeem the loser; in bearish and range bound market, extremelossers possess the inverse dispositon effect of enthusiastically redeem the extreme loser.Since the fund investors will do different types of redemption behaviorunder differentmarket conditions, which means that do the research of investors’ redemption behavior isnecessary under different market conditions. Hence, the paticipants of mutual fund can dependon different conditions to make appropriate strategies and increase the efficiency of decisions.