An Empirical Analysis of Chinese Equity Open-end Fund Flows

This paper examines Chinese equity open-end fund flows using net redemptions rate caused by capital flows from July 1, 2004 to June 30, 2008. We find that pre-fund return, contemporaneous market return and contemporaneous dividends are significantly negatively correlated to net redemptions rate. Net redemptions rate and the size of the fund is inverted U-shaped relationship. Fund redemption rate is positively related to ownership concentration, the higher the concentration of the fund's holdings, the greater the fund net redemptions rate. Net redemptions rate is negatively correlated to the proportion of fund institutional investors that are not stable investment groups because of low transaction costs and instability of funding sources.