IDEAS home Printed from https://ideas.repec.org/a/taf/oaefxx/v12y2024i1p2373258.html
   My bibliography  Save this article

Flows, performance, and investor behavior: evidence from mutual funds in China

Author

Listed:
  • Ping Zhang
  • Zi-Xu Lv
  • Jun-Ya Liu

Abstract

This study examines the investor behavior of mutual funds in China. Our results show little evidence about the redemption puzzle. We further refute the disposition effect, that is, investors do not tend to redeem funds with superior past performance. Additionally, market conditions are crucial for investment decisions. In bull markets, investors are prone to taking risks while being conservative and prudent during bad times. Considering investor heterogeneity, we find that institutional investors value the funds’ past performance metrics, assigning greater weight to historical performance. Both institutional investors and individual investors show stronger sensitivity to complicated performance indicators in bad times than good times. Furthermore, we find that investors in China chase for the star funds. We also perform tests on the existence of the smart money effect, and the results show that investors can screen good funds from bad ones.This study examines the investor behavior of mutual funds in China. Our results show little evidence about the redemption puzzle. We further refute the disposition effect, that is, investors do not tend to redeem funds with superior past performance. Additionally, market conditions are crucial for investment decisions. In bull markets, investors are prone to taking risks while being conservative and prudent during bad times. Considering investor heterogeneity, we find that institutional investors value the funds’ past performance metrics, assigning greater weight to historical performance. Both institutional investors and individual investors show stronger sensitivity to complicated performance indicators in bad times than good times. Furthermore, we find that investors in China chase for the star funds. We also perform tests on the existence of the smart money effect, and the results show that investors can screen good funds from bad ones. Overall, this study offers valuable insights into the decision-making processes of Chinese mutual fund investors, providing a more nuanced understanding of their behavior compared to established financial theories.

Suggested Citation

  • Ping Zhang & Zi-Xu Lv & Jun-Ya Liu, 2024. "Flows, performance, and investor behavior: evidence from mutual funds in China," Cogent Economics & Finance, Taylor & Francis Journals, vol. 12(1), pages 2373258-237, December.
    • Handle: RePEc:taf:oaefxx:v:12:y:2024:i:1:p:2373258
    DOI: 10.1080/23322039.2024.2373258
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/23322039.2024.2373258
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/23322039.2024.2373258?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:oaefxx:v:12:y:2024:i:1:p:2373258. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/OAEF20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.