Mutual Fund Flow-Performance Relationship Under Volatile Market Condition

40 Pages Posted: 26 Jan 2013

See all articles by Mingsheng Li

Mingsheng Li

Bowling Green State University - College of Business Administration

Jing Shi

Macquarie UNiversity

Jun Xiao

Jiangxi University of Finance and Economics

Date Written: January 25, 2013

Abstract

We analyze the relationship between flows and performance of Chinese mutual funds that trade in a volatile market environment. Consistent with existing literature, we find that the net flow to a fund is positively related to past fund performance. Contrary to previous studies using samples in the U.S. and other countries, our results do not exhibit an asymmetric flow-performance relationship, nor do we find any significant star effect in China. These results imply that market volatility plays an important role in reducing the asymmetric flow-performance relationship. Furthermore, we find that the positive relationship is more pronounced during bull markets than during bear markets. This suggests that Chinese mutual fund investors are more confident and invest more aggressively when stock markets perform well.

Keywords: Chinese mutual funds, Flow-performance relationship, Asymmetric relationship, Disposition effect, House money effect, Star effect, Cognitive dissonance, Attribution bias, Overconfidence

JEL Classification: G14

Suggested Citation

Li, Mingsheng and Shi, Jing and Xiao, Jun, Mutual Fund Flow-Performance Relationship Under Volatile Market Condition (January 25, 2013). Asian Finance Association (AsFA) 2013 Conference. Available at SSRN: https://ssrn.com/abstract=2206905 or http://dx.doi.org/10.2139/ssrn.2206905

Mingsheng Li

Bowling Green State University - College of Business Administration ( email )

Bowling Green, OH 43403
United States

Jing Shi (Contact Author)

Macquarie UNiversity ( email )

Eastern Rd.
North Ryde
Sydney, NSW 2109
Australia

HOME PAGE: http://https://researchers.mq.edu.au/en/persons/jing-shi

Jun Xiao

Jiangxi University of Finance and Economics ( email )

South Lushan Road
Nanchang, Jiangxi 330013
China

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
224
Abstract Views
1,180
rank
141,726
PlumX Metrics