An Empirical Study on the Non-Linear Relationship between the Performance of Funds and the Cash Flows of Funds
- 1 Department of Finance, College of Economics, Jinan University, Guangzhou, China
Abstract
This article takes 152 open-ended stock funds and partial stock funds established before the second quarter of 2015 as samples. Using the regression model of the non-balanced panel data fixed-effect model, this paper discussed the specific impact of the historical performance and other influencing factors on the purchase and redemption of investors from the first quarter of 2013 to the second quarter of 2017. And the nonlinear relationship between fund performance and capital flow is investigated by piecewise linear regression. The empirical results reveal that the fund ’ s lagging quarterly performance ha s a positive impact on the funds flow in the next quarter. Investors generally chase performance rather than “reverse selection”, and find that the relationship between historical performance and capital flow is non-linear. The fund flow has different sensitivity to outstanding performance fund, medium performance fund and poor performance fund. Fund flow is most sensitive to outstanding performance funds, followed by the medium performance fund , and insensitive to the poor performance funds. Finally, this paper uses the theory of “ principal-agent ” to analyze the results, and puts forward suggestions to improve the performance incentive mechanism of China ’ s fund market.
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