An Empirical Study On The Relationship Between Capital Flow,Investment Behavior And Performance Of Open-end Funds

China's open-end funds were officially issued in 2001.The rise of the fund industry not only effectively promoted the development of the capital market,but also brought new investment opportunities for Chinese investors.Because open-end funds have the characteristics of free purchase and redemption,as the transaction occurs,the fund's capital flow will continue to change.This feature of open-end funds provides investors with diversified choices,and further amplifies the liquidity risk of the fund,posing a major challenge to its liquidity management.Most of the existing researches focus on the direct impact relationship between capital flow and fund performance,known as the "fund flow-performance" relationship.There are few studies on the fund investment behavior as the agent intermediary for the fund flow impact fund performance.Therefore,based on the liquidity limitation theory and fund scale effect,this paper empirically analyzes how the open-end fund of China adjusts the fund investment behavior under the capital flow driven from the perspective of "fund flow-investment behavior-performance".The fund investment behavior is used as the intermediary agent of the fund flow to influence the fund performance,and further discuss whether the fund's investment behavior can effectively offset the negative impact of liquidity constraints on the fund performance.This paper builds a sample from China's 2006-2017 stock-type and hybrid open-end funds.Through multiple screening and testing,1286 funds that meet the research conditions were selected as the research object,totaling 4939 fund years.In order to prevent survivors from deviating,the funds delisted in the study interval are not excluded,and large unbalanced panel data is finally formed.The empirical process will mainly use STATA14.0 software to perform multiple regression analysis on the fixed effect model,and finally build GMM dynamic panel.The regression model was tested for robustness.This paper constructs a two-part empirical model.The first part will study the impact of fund flow changes on fund investment behavior from a djynamic perspective,mainly based on the diversification of shareholding and shareholding ratio as a measure of fund investment behavior and analyze the fund's capital flow from the perspective of liquidity constraints.In order to better verify the existence of liquidity constraints,the control variables representing the size of the fund and the investment style are introdLiced into the model of the first part,and the research samples were divided into large and small funds sizes,large and small stock funds respectively,studying whether there are differences in investment behaviors when funds of different sizes and investment styles face changes in capital flows.The second part mainly studies the changes of capital flow and the impact of fund investment behavior on fund performance.As China's stock market has experienced large fluctuations in recent years,the liquidity risk of funds will be rapidly amplified in special and extreme market environments.Therefore,this paper will study the impact of capital flow shock on performance by introducing the fund flow volatility of the fund.In order to prove whether the investment behavior has the role of intermediary agent,it will further investigate whether the change of fund investment behavior can mitigate the liquidity risk caused by the volatility of capital flow.In order to effectively measure fund performance,this part of the study will use the Fama-French three-factor model to adjust the fund's yield indicator.The empirical results show that:(1)The investment behavior of China's open-end funds is significantly affected by the changes in capital flows.As the capital inflows increase,the foundation increases the shareholding ratio and the degree of shareholding diversification,and the tendency to increase the shareholding ratio is greater.With the further inflow of funds,due to the strong liquidity constraints,the fund began to increase the degree of shareholding decentralization to reduce liquidity constraints.(2)Large-scale funds and small-cap funds have strong liquidity constraints due to their own characteristics.Therefore,with the inflow of funds,the tendency to increase the degree of shareholding dispersion is greater than the tendency to increase the shareholding ratio.Stock funds are more sensitive to changes in shareholding diversification.(3)With the changes in the fund's capital flow,the adjustment of fund investment behavior can improve its performance,but the shareholding diversification can only improve the performance of the fund within a certain range.When the fund's shareholding is too dispersed,it will damage the fund's performance.(4)The impact of the fund flow on the fund will erode the fund's performance.Although the fund's adjustment of investment behavior has a positive effect in overcoming the liquidity shock,it cannot completely offset the negative impact caused by the large fluctuation of the fund's capital flow.The phenomenon of performance erosion of large-scale funds under the impact of liquidity is even more significant.