An Empirical Study On Chinese Open-End Fund Integrated Performance And The Behavior Of Purchase And Redemption

In the last decade, the open-end fund has been developing rapidly. Unlike closed-end fund, investors can purchase and redeem open-end fund directly from itself, thus to change the amount of shares. The purchase and redemption of the fund, especially the withdrawals could be destructive to the fund operation as well as the stability of the capital market. Thus studying the factors that affect the purchase and redemption behavior is crucial. One of the most important factors that affects the inflows and outflows of open-end fund is the performance of the fund. Since the evaluation of fund's performance will significantly affect the analysis results, it's important to choose an appropriate measurement of fund's performance. Furthermore, there're many other factors that affect the inflows and outflows of open-end fund which we will take into account when analyzing.Based on the domestic studies and research abroad, this paper analyses the effects of the open-end fund performance on the investors' purchase and redemption behavior in China. In order to evaluate the fund's performance more accurately, the indexes are selected from two aspects, one is risk-adjusted performance, including Sharp, IR, RAROC, and the other is based on T-M model, describing the timing ability and security selection ability of open-end fund. Using these indexes, this paper builds an integrated performance index.Then using data of 32 open-end funds in 16 seasons, this paper makes an empirical study:first part is the theoretical hypothesis, data description; the second part is to build purchase and redemption model to study how the integrated performance together with other factors influences inflows and outflows; the third part is using NAV and Sharp respectively as the index of performance and make the empirical study to see whether there're different results; the forth part is to see in the bull market and bear market, whether the effects of those factors will change. Conclusion is made on the results of the study.The final conclusions are as follows:The redemption of the open-end fund is negatively correlated with its performance while net purchase is positively correlated with its pre-performance; The redemption is positively related with the previous dividend, but has no correlation with the current dividend, while net purchase is positively correlate with both previous and current dividend; Both redemption and net purchase is positively correlated with market index and the size of funds, but is negatively correlated with the age of the funds; The Chinese investors are rational while making decisions, they don't simply use single index to evaluate a fund but more likely to judge it more comprehensively; Meanwhile, this paper also confirms that there're disposition effect and herd behavior among Chinese fund investors.