An Empirical Study On The Liquidity Risk Bearing Capacity Of China's Money Market Funds

The net asset value of China's money market funds had reached 7981.9 billion yuan,accounting for 64.27% of the whole asset value of the open-ended funds in China as of May 31,2008.With the growing scale,the liquidity risk management of money market funds is undoubtedly a concern.At present,the regulators are gradually strengthening the management of the liquidity risk of money market funds,and have issued several policies/regulations to guide and regulate the money market fund industry.However,there are only a few academic studies on the liquidity risk management of money market funds as well as taking advantages of stress testing to study the liquidity risk management of money market funds.Therefore,this paper constructs a multivariate regression model using money market funds established before 2010 in China to explore the relationship between various factors and the liquidity risk of money market funds;at the same time,this paper constructs a stress testing model to explore the liquidity risk management of China's money market funds.The content of this paper can be roughly divided into six chapters as follow:The first chapter mainly expounds the background and the significance of this paper,summarizes the research methods,the main research contents and the innovations of the research.The second chapter is the literature review of the liquidity risk of money market funds and the stress testing.It first introduces the relevant concepts,and then expounds the related research on the liquidity risk of money market funds and liquidity risk stress testing,finds out the deficiencies or gaps in it,forming the research ideas of this paper.The third chapter is an overview of the development of money market funds in China,including the four developing peaks and the four redemption tides in China's money market funds.Then summarizes the main factors affecting the liquidity risk of money market funds,including single-fund-level and fund-industry-level.The fourth chapter is the design of the liquidity risk test model of China's money market funds,including the empirical model of the effective influencing factors of the liquidity risk of money market funds and the liquidity risk stress testing model.The fifth chapter is the empirical study on the liquidity risk of China's money market funds,including the empirical study on the effective influencing factors ofChina's money market fund liquidity risk and the liquidity risk bearing capacity testing of China's money market funds.The sixth part is conclusions,recommendations and prospects,mainly states the conclusions of this paper,and puts forward some corresponding policy recommendations on the liquidity risk management of China's money market funds according to the empirical conclusions;finally,it points out the shortcomings of this paper as well as areas for improvements in the future.The empirical results of this paper show that:(1)the cumulative establishment time of money market funds has no significant impact on liquidity risk;(2)the liquidity risk of money market funds is significantly negatively and positively affected by SZZS and shibor,respectively;(2)money market fund's return rate,the scale of asset managed by the fund company and the GDP growth rate have negative effects on the liquidity risk of money market fund,while the residual maturity of the fund portfolio has positive effect on the liquidity risk;(3)the proportion of institutional investors and the growth rate of M2 have no significant impact on liquidity risk of money market funds;(4)The liquidity risk bearing capacity test show that China's money market funds can't meet the redemption requirements of investors under severe,moderate or mild pressure.Meanwhile,compare to large-scale money market funds,the ability to bear liquidity risk of small-scale money market funds is better.Under each pressure scenario,the net redemption rate of shares is lower than that of large-scale money market funds.Therefore,we should pay special attention to the liquidity risk management of large-scale money market funds.The innovations of this paper are as follows:(1)There are few empirical studies on the influencing factors of liquidity risk of money market funds,this paper makes a useful supplement to this aspect;(2)This paper uses panel data regression model to innovate the empirical research methods in the influencing factors of liquidity risk of money market funds.(3)There are few empirical studies on liquidity risk of money market funds using pressure test method.This paper establishes panel data regression model measure the liquidity risk bearing capacity of China's money market funds,which is a useful supplement to the theoretical research on liquidity risk stress testing.