Research On The Impact Of Fund Manager’s Reputation On Disposition Effect And Fund Performance

Since 1998,the development of China’s securities investment fund industry has been very rapid.Especially in the years after 2012,the average growth rate of the industry scale has been more than 30% per year.As a means of gathering funds of fund investors and constructing portfolios for securities investment,funds have become more and more important in the lives of residents.Although high-quality funds can create wealth for investors,the low-quality funds,however may cause considerable losses.In order to study the basis for fund investors to choose funds,many scholars have studied the influencing factors of fund flow in the fund industry,one of which is the reputation of fund managers.In many markets,evidence of money flow chasing reputable fund managers can be found,which means that many investors believe that reputable fund managers can achieve high returns in the future.However,the widespread phenomenon of diseconomies of scale in the fund market makes the reputable fund managers unlikely to meet expectations of investors.Therefore,it may not be a rational choice for fund investors to pursue highly reputable fund managers.In addition,the improvement of reputation of fund managers may not only cause the negative impact of diseconomies of scale.The self-justification hypothesis in cognitive dissonance theory suggests that high-reputation fund managers may have higher disposition effect,and disposition effect has a negative impact on future fund performance.This paper studies the influence of reputation of fund managers on disposition effect and future fund performance,which can explain whether it is rational for fund investors to invest in funds managed by high-reputation fund managers.There are two main contents in this paper.One is to study the influence of fund manager’s reputation on fund manager’s disposition effect,and the other is to study the influence of fund manager’s reputation on the future performance of fund.Based on the data of 568 fund managers of equity funds and partial-equity funds in China from 2007 to 2018,this paper measures the reputation of fund managers by using the average value of historical performance of funds managed by fund managers,the disposition effect of fund managers is measured by selling ratio statistics,and fund performance is measured by the average value of return of funds managed by fund managers in the future.The relationship between reputation,disposition effect and fund performance and whether the relationship is stable were studied by grouping test and histogram analysis.The results show that on average,there is a significant positive relationship between reputation and disposition effect of fund managers,and the histogram of correlation coefficient shows a significant right deviation,which means that this positive relationship is not formed by some extreme cases,but is valid and stable for most fund managers.Similarly,this paper also finds that there is a significant negative relationship between the reputation of fund managers and fund performance,and the histogram of correlation coefficient is obviously left-sided.In order to reduce the endogeneity and make the conclusion more robust,this paper uses the fixed effect model for further analysis,and uses other proxy variables to test,the results are consistent.The results of this study show that,compared with low-reputation fund managers,high-reputation fund managers show greater disposition effect.The reputation of fund managers has a significant negative impact on the future weekly,monthly,quarterly and semi-annual performance of the fund.It can prove that the pursuit of high reputation fund managers is not a rational choice.