Fund performance-flow relationship and the role of institutional reform
Fund performance-flow relationship and the role of institutional reform
Author(s): Jinyu Feng, Wenzhao WangSubject(s): Economy, Economic policy, Financial Markets
Published by: ТОВ “Консалтингово-видавнича компанія “Ділові перспективи”
Keywords: Chinese mutual fund market; institutional reform; investor rationality; market efficiency; performance-flow relationship;
Summary/Abstract: Extant literature shows the positive impact of institutional development on investor rationality and market efficiency. The authors extend this evidence by investigating the performance-flow relationship in the Chinese mutual fund market before and after the enforcement of the revised Law of the People’s Republic of China on Securities Investment Fund. Empirical evidence reveals that Chinese investors irrationally chase past star performers before institutional reform, but gradually become rational and less obsessed with star-chasing behaviors after reform. Moving one percentile upward in the relative performance among the star funds is associated with money inflows by 0.532% after reform, much lower than 1.433% before reform. The findings confirm the positive influence of institutional development on investor rationality and market efficiency. The successful experience can be borrowed by other emerging markets with less developed institutions.
Journal: Investment Management and Financial Innovations
- Issue Year: 15/2018
- Issue No: 1
- Page Range: 311-327
- Page Count: 17
- Language: English
