LU Rong , XU Longbing , XIE Xinhou , CHEN Baizhu

Author information

a School of Finance, Shanghai University of Finance and Economics, Shanghai 200433, China

b School of Finance, Shanghai University of Finance and Economics, Shanghai 200433, China

c School of Finance, Shanghai University of Finance and Economics, Shanghai 200433, China

d Department of Finance, Marshall School of Business, University of Southern California, Los Angeles, CA 90089, USA 

Abstract

We examine the performance-flow relationship(PFR) in Chinese open-end fund market and find that PFR is negative and concave. The shape of PFR indicates that investors’ choice does not pose an incentive mechanism on fund managers: The better an open-end fund performs, the higher the net redemption rate is. We argue that return volatility, dividend and fund size are also important factors on investors’ choice making. Such results are valuable for fund management to reduce this redemption puzzle. 

Keywords

open-end fund, fund performance, cash flow, redemption puzzle

Cite this article

LU Rong , XU Longbing , XIE Xinhou , CHEN Baizhu. Redemption puzzle of open-end fund market in China. Front. Econ. China, 2008, 3(3): 430‒450 https://doi.org/10.1007/s11459-008-0020-x