The Study On Relationship Between Equity Open-end Fund Performance And Investors’ Behavior

Open-end fund is a major investment product in Chinese capital market. This article chooses the behavior of equity open-end fund investors as the research object, trying to make comprehensive theoretical research and empirical analysis toward the performance-flow relationship.Based on fixed effect unbalanced panel data regression model, the article firstly analyzes the relationship between the historical performance and fund inflow, outflow and netflow, separately using quarterly and annual return as explanatory variable; Secondly, according to the stock market index, the article divides the sample period into boom and depression period, to find if there is any change on fund investors’ decision in different periods; Thirdly, the article adds two virtual variables, star fund and dog fund, into the previous model, to study if there is celebrity effect in the fund market.The empirical results show that:(1) previous quarterly and annual rate of return have significant positive impacts on the current fund inflow, outflow and netflow. What’s more, the coefficient of quarterly return is larger than the coefficient of annual year, and there is no "Redemption Anomaly" in China’s open-end fund market;(2) under different economic cycle, the consideration of fund investors is not the same. In boom period, the coefficient of fund return is larger but the impact of the market rate of return is not obvious, which shows the investors are more willing to take risks and the expected effect is dominant. In depression period, the coefficient of fund return decreases, and market return begins to influence the purchase decision, which suggests that investors are more cautious;(3) there is celebrity effect in Chinese fund market. Star fund can significantly increase the following cash flow, but dog fund will not significantly increase outflow. In addition, being a star fund can not significantly prevent outflow, and the inflow of dog fund doesn’t significantly reduce, neither, which means the investors’investment behavior is asymmetry. Finally, this article proposes some relevant suggestions to the fund companies and investors respectively. The fund companies should improve research skills and implement a stable dividend policy which bring tangible returns to investors; strengthen the maintenance of investor satisfactory, protect the interests of fund holders. The fund investors should have rational and stable investment philosophy, and reduce risk by decentralized configuration.