The Impact of Market Sentiment on Fund Flow

Abstract

This paper studies the impact of market sentiment on fund flow. We collect fund data from 2010 to 2020 and relevant data to measure investor sentiment. At the same time, the fund is divided into six different types and analyzed respectively. We find that the open-ended fund, LOF fund, the open-ended fund (with a fixed closing period), and the ETF fund lead to the increase of fund redemption share with the increase of investor sentiment. Moreover, In the case of the same investor sentiment, the larger the scale of the fund, the smaller the redemption share of the fund. Second, FOFs and innovative closed-end funds are buying more shares as investor sentiment grows. At the same time, in the same investor sentiment, the larger fund size will reduce the subscribing share. This study provides a new perspective for understanding the relationship between fund performance and fund flow in China and is conducive to investors making rational investment decisions.