Irrational factors’ impacts on the Performance-Flow Relationship of mutual fund
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| Title | Irrational factors’ impacts on the Performance-Flow Relationship of mutual fund
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| Author | Wu Yanran,Wang Kai, Li Rui, Han Liyan and Su Song |
| Organization | Business School, Beijing Normal University ;School of Economics and Management, Beihang University |
| Email | bjfreelord@163.com;wangkaibnu@163.com;lirui67@bnu.edu.cn;hanly1@163.com;sus@bnu.edu.cn |
| Key Words | Funds Flow; Investor Sentiment; Fund Split; Redemption Anomaly of Mutual Fund; Convexity |
| Abstract | We first explore the effects of two irrational factors, investor sentiment and chasing behavior of fund splits(CBFS), on the flow and the Performance-Flow Relationship(PFR) of mutual fund and we believe they come from the Framing Bias of mutual fund investors. We also investigate more deeply on the mechanism of the impacts of the two factors. First, our results support that investors in Chinese mutual fund market chase past fund performance and the PFR is convex. Second, we find that investor sentiment and CBFS both have significant positive impacts on the net flow and investor sentiment will weaken the convexity but CBFS will not, which means the investors are irrational. Third, fund performance and investor sentiment influence the net flow mainly by influencing the purchasing rather than the redemption behavior of investors. Finally, we further demonstrate that investors’ irrational chasing for sentiment and fund splits can damage their long-term returns. |
| Serial Number | WP1221 |
| Time | 2017-09-12 |
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