The Influence Of Insufficient Liquidity Of Open-End Equity Funds On The Price Of Stock Held By Funds

Since the beginning of the 21 st century,open-end fund market has gradually expanded and developed.After a long development cycle,it has now had a relatively complete market system.At present,China’s open-end funds have occupied a large proportion in the fund market.As of the second quarter of 2022,the number of open-end funds has reached 8885,accounting for 87.8% of the total funds.Compared with closedend funds,open-end funds have the characteristics of "openness".Fund investors can freely purchase and redeem,which provides investors with high liquidity and diversity,but also challenges the asset allocation strategy and liquidity management of funds.Under the impact of external negative liquidity,the liquidity risk of funds with insufficient asset liquidity will be amplified,which is easy to form a domino effect of investors redeeming fund shares,funds selling assets to obtain liquidity,and asset price fluctuations.Therefore,it is of practical significance for stabilizing the financial market,optimizing the asset allocation strategy of open-ended funds and protecting the legitimate rights and interests of investors to clarify the impact of insufficient liquidity of open-ended funds on the assets held by funds.Based on the above background,this paper analyzes and summarizes the causes and effects of open-end fund liquidity risk.Some scholars have found that negative liquidity shocks will lead to asset selling of funds with high redemption pressure,which will cause price fluctuation of assets held by funds.In addition,scholars found that the lack of asset liquidity of open-end funds makes funds more vulnerable to the impact of investor runs,which makes funds bear greater redemption pressure under negative impact.Therefore,this paper puts forward a conjecture that insufficient liquidity of open-ended funds will force funds to sell assets and cause fluctuations in the prices of assets held by funds.In the existing literature,there are few studies to analyze the contagion effect of fund liquidity risk based on the insufficient liquidity of the asset side,and the role of selling pressure in the contagion effect of fund liquidity risk needs to be further studied.Therefore,this paper combines the insufficient liquidity of fund assets,fund selling assets and asset price fluctuation to analyze,and explores the impact of insufficient liquidity of open-ended funds on the price fluctuation of their held assets.This paper takes open-end equity funds as the research object,and takes 2015 to2021 as the research interval.It selects 239 open-end equity funds’ stocks as data samples,and constructs vulnerability scores for the stocks held by the funds based on the insufficient liquidity of the funds’ assets.This vulnerability can be understood as: the open-end equity fund with insufficient asset liquidity is vulnerable to the run on its shares by investors,which will have a negative impact on its stocks.This paper uses the fixed effect model to test and analyze the relationship between the stock vulnerability caused by the insufficient liquidity of the fund assets and the volatility of the stock price held by the fund from the perspective of micro individuals,and introduces the selling pressure as the intermediary variable to test the intermediary effect and examine the potential transmission mechanism of the above relationship.Finally,in order to deepen the understanding of how the lack of asset liquidity of open-end equity funds affects stock prices,this paper introduces the fund liquidity buffer index and shareholding ratio to explore the impact of these two variables on the relationship between the lack of asset liquidity of funds and stock prices.The results show that: First,the insufficient liquidity of open-end equity funds will cause the volatility of the stock prices held by the funds.Second,to a certain extent,the selling pressure will transmit the liquidity risk of the open-end equity fund asset side to the stock price fluctuation.Third,the liquidity reserve of open-ended funds can reduce the impact of insufficient liquidity of fund assets on stock prices.Fourth,when the proportion of stock assets in the open-end fund’s asset portfolio is high,the insufficient liquidity of the fund’s assets will lead to higher volatility of the stock price.