| China’s public fund style drift phenomenon has attracted a great deal of attention from the regulatory authorities,who have recently taken regulatory measures against fund style drift,aiming to limit "style drift","high turnover rate" and other behaviors to obtain short-term trading gains.In addition,China’s public fund industry is growing rapidly and the level of competition has intensified.As of June 30,2022,a total of10,010 public funds were offered in China,with net asset value reaching 26.79 trillion yuan,and fund investment has become one of the important financial management methods for ordinary residents.Due to the problem of information asymmetry between investors and fund managers,and the increasingly fierce competition in the fund industry,under the pressure of performance ranking,will fund managers take advantage of their information and change their original investment style? Therefore,under the background that fund style drifting behavior has become a concern for market regulators,the study on the relationship between performance ranking and style drifting of public funds has practical significance and contemporary background.In terms of empirical evidence,this paper first identifies the actual investment styles of China’s public funds from 2011-2021 by constructing the DGTW style index and using a position-based fund style identification method,and measures the extent of fund style drift by calculating the voluntary fund style volatility for each period.Secondly,the relationship between mid-period performance ranking and fund style drift is studied,and the moderating factors between mid-period performance ranking and fund style drift are analyzed by using fund manager changes,market environment,fund size,and the proportion of fund shares held by institutional investors as moderating variables.Finally,the study analyzes the impact of fund style drift on fund flows.The theoretical and empirical findings of this paper suggest that,first,style drift is prevalent in Chinese public funds.Second,funds with better mid-period performance rankings are more likely to detect style drift in the next period.Third,the relationship between fund mid-period performance ranking and fund style drift is moderated by a series of factors: fund manager changes have a positive moderating effect on the relationship between mid-period performance ranking and fund style drift,bull market environment has a negative moderating effect on the relationship between mid-period performance ranking and fund style drift,fund size has a negative moderating effect on the relationship between mid-period performance ranking and fund style drift,and institutional investors ownership has a negative moderating effect on the relationship between mid-period performance ranking and fund style drift.Fourth,the fund style drift behavior can be a negative moderator of the relationship between fund performance ranking and fund style drift.Fourth,fund style drift promotes net fund inflows,and this phenomenon is more pronounced in bull markets.There are three main innovations in this paper.First,by borrowing from Daniel et al.(1997),this paper adopts a position-based analysis(HBSA)method to identify the actual investment styles of funds by constructing the DGTW style index.Compared with the fund return-based(RBSA)style identification method,it can avoid the shortcomings of lower fit in the regression process and can identify fund styles in a timely and accurate manner.Second,this paper investigates and analyzes the causes of fund style drift from the perspective of mid-period performance ranking.Unlike the previous literature,this paper introduces four moderating factors: fund manager changes,market environment,fund size,and the proportion of fund shares held by institutional investors,which enriches the research on the influence of mid-period performance ranking on fund style drift.Third,the impact of fund style drift on fund capital flows is investigated.Different from previous literature,this paper takes market environment as a moderating factor to study the differential impact of fund style drift behavior on fund fund flows under different market environments. |
