Adjustment Of Bond Fund Portfolio Structure And The Performance Of Secondary Market

In the frictionless market without wealth effect or liquidity constraint,the adjustment of bond fund portfolio will not be affected by investors’ liquidity demand.That means the fund trades its portfolio in accordance with the original proportion when bond fund is redeemed,so that its net asset value decreases while the portfolio generally remains unchanged.However,there is no frictionless market in reality.When faced with investor redemption,bond funds must take active on liquidity risk management measures,such as using cash assets to absorb the liquidity risk brought by investor redemption.Based on existing literature,this paper attempts to answer the following two questions:(1)In the face of investors’ liquidity needs,will bond funds adjust their portfolio structure,and will they give priority to sell cash assets rather than selling bonds to meet investors’ liquidity needs?(2)When bond funds face large redemptions,will bond funds with less cash assets affect the price of bonds in the secondary market and the stability of the bond market?This article is divided into five parts when researching the above issues.The first part is the introduction,which elaborates the research background and significance of this article,and then systematically reviews and sorts out relevant research literature at home and abroad to summarize the innovations and deficiencies of this article.In the second part,the theoretical analysis of portfolio investment and investor behavior of open-end funds is carried out.This section introduces the portfolio structure of open-end funds;it also analyzes the impact of investor’s redemption behavior on the fund portfolio structure from a theoretical perspective,indicating that fund managers will constantly adjust to respond to investor behavior to make the fund’s asset allocation ratio Keep at the optimal value set by the fund manager.In addition,this paper proposes five research hypotheses in this section.The third part analyzes the relationship between investor behavior and bond fund portfolio structure adjustment through empirical analysis,and uses quantitative analysis to determine whether the fund will preferentially sell the cash or cash assets it holds to buffer redemption when bond funds redeem.The pressure,whether to choose to trade securities assets with better liquidity,the final conclusion is positive.The fourth part discusses the market performance of bond funds with insufficient cash assets to sell bonds when faced with large redemptions from the perspective of investor redemption behavior.Once the redemption share is too large,it will force the fund to trade its bonds.Whether the price of the bonds being sold at this time will be affected if corporate bonds or corporate bonds with poor liquidity are held.In the last section of this section,this article analyzes the impact of investor redemption behavior on the stability of the secondary bond market from a qualitative perspective.In general,this part discusses investor redemption behavior and secondary market performance.The fifth part is the main research conclusions.This part comprehensively compiles the research conclusions formed by this article by systematically combing and summarizing the previous related research content.Based on panel regression model and PSM-DID model,this paper conducts an empirical test on the above problems using sample data of 756 sample funds and corporate bonds held by them from 2006 to 2018,and the main research conclusions can be summarized as follows:(1)Analysis of the portfolio structure of bond funds in response to liquidity risks.At the fund level,this paper finds that when bond funds redeem 1%,the proportion of corporate bonds or corporate bonds in their portfolio will increase by 0.23%,while their cash assets will decrease by 0.05%.In the bonds level,this paper found that when the bond fund every 1%redemption,its portfolio of corporate bonds or corporate bonds are traded only 48.4 basis points.Therefore,when the fund redemptions occur,the fund managers do not trade according to the original portfolio proportion,but prefer to trade cash assets to meet investors’ capital needs.(2)The research results of this paper show that if bond funds with low cash assets(cash assets account for less than 5%of the portfolio)suffer from large redemptions,the current yield of the bonds they sell will drop by 0.0921%in the redemption quarter due to the fund selling,but the yield of bonds will rebound in the next quarter.Therefore,the large redemption of bond fund will have a negative impact on the price of its selling bonds,and the impact is temporary.Even so,market low cash bond funds accounted for more and more along with our country,and lower cash holdings of bonds in the portfolio,corporate bonds and corporate debt holdings is now close to 50%,so the bond fund to liquidity shocks to the combination of structural adjustment may also be a potential threat to the stability of the bond market.