TITLE:
An Empirical Study on the Non-Linear Relationship between the Performance of Funds and the Cash Flows of Funds
AUTHORS:
Feng Chen
KEYWORDS:
Fund Performance, Capital Flow, Nonlinear Relationship, Principal-Agent
JOURNAL NAME:
American Journal of Industrial and Business Management,
Vol.8 No.4,
April
27,
2018
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 has 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.