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Redemption puzzle of open-end fund market in
China |
| LU Rong 1, XU Longbing 1, XIE Xinhou 1, CHEN Baizhu 2 |
| 1.School of Finance, Shanghai University of Finance and Economics, Shanghai 200433, China; 2.Department of Finance, Marshall School of Business, University of Southern California, Los Angeles, CA 90089, USA |
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Abstract We examine the performance-flow relationship(PFR) in Chinese open-end fund market and find that PFR is negative and concave. The shape of PFR indicates that investors’ choice does not pose an incentive mechanism on fund managers: The better an open-end fund performs, the higher the net redemption rate is. We argue that return volatility, dividend and fund size are also important factors on investors’ choice making. Such results are valuable for fund management to reduce this redemption puzzle.
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Issue Date: 05 September 2008
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