Holding-based Styles And The Spatial Correlation Of Mutual Fund Flows And Prices

In recent years,China's fund industry has achieved rapid growth under the guidance of the government.The total number of equity and hybrid funds is increasing,and the fund products are also diversified,providing investors with an important indirect participation channel in stock trading.In order to reduce the search cost in the fund selection process,investors often use the information of a fund's investment style to improve their decision-making efficiency.This study analyzes the balanced panel data of the open-end equity and hybrid funds in China from the first quarter of 2011 to the fourth quarter of 2016 using spatial panel autoregressive models.Based on the investment style which is determined by the market value and value-growth characteristics of a fund's stock holding portfolio,this study explores the interaction among flows of the same-investment-style funds,of the opposite-investment-style funds,and of the funds with similar stock holdings,and further,the resulting correlation among fund prices.The results show that after controlling some characteristics of the fund itself,the flow of a fund is positively affected by flows that belong to its same-investment-style funds or funds with similar stock portfolios;in the meantime,the:flow is negatively affected by flows that belong to its opposite-investment-style funds.Further,prices of funds with the same investment style or similar stock holdings comove,while prices of funds which have opposite investment styles are negatively correlated.This study not only confirms the style investing behavior of fund investors in China,but also has valuable implications for the investor education and the fund company self-regulation.