Fund Purchases Research Articles

Individual investment adaptations to COVID-19 lockdowns

Utilizing online wealth management data from Ant Financial and manually curated data from COVID-19 lockdown regions in China, this study sheds light on the impact of COVID-19 lockdowns on individual investment pattern. Applying a Staggered Difference-in-Differences methodology, we find significant decrease in both the volume and proportion of individual holdings in risky mutual funds after their initial exposure to lockdowns. This decline mainly corresponds to a decrease in risky mutual fund purchases and an increase in redemptions. Mechanism analysis reveals this change is due to a notable decrease in individuals’ overall assets during lockdowns, leading to a higher allocation toward risk-free money market funds. Heterogeneity analysis highlights these impacts are more pronounced among individuals with lower risk tolerance. Additionally, there is a notable drop in individuals’ equity fund holdings. The lockdowns prompt a conservative shift in individuals’ wealth strategies.

Analysis of Influential Factors of Fund Purchasing Behavior Based on Multimodality--Based on College Students in Shanghai at Pudong New Area

The purpose of this paper is to study the behavior of college students in purchasing funds and their influencing factors. By distributing online and offline paper questionnaires to college students in Pudong New Area, Shanghai, and at the same time, obtaining first-hand information about college students' fund purchasing through the Internet. According to the survey results of the questionnaire, followed by the analysis of the characteristics of the fund purchasing behavior of college students in Pudong New Area, using the decision tree model to analyze the fund purchasing behavior and purchasing decision, through the questionnaire research and the Zhihu comment crawler to draw the word cloud diagram to derive the different influencing behaviors of college students on the purchase of funds, and the use of LDA sentiment analysis model to derive the double comments of college students in Pudong New Area on the attitude of fund purchasing. The following main conclusions were obtained through this research study:1) Social media communication has become a key factor influencing fund purchases, with college students prioritizing news media and online bloggers for initial understanding before purchasing funds;2) College students' purchase of funds is highly enthusiastic but mostly experimental. Due to their insufficient understanding of the fund market and small sources of income, they choose low-risk funds for experimentation. Undergraduates' financial knowledge is shallow and their ability to bear economic risks is weak, and they lack sufficient knowledge and experience in financial literacy. Finally, the correlation suggestions are put forward: refuse to blindly follow a single source of information to buy funds; some undergraduates have little financial knowledge and buy more impulsively; keep a good mindset of long-term investment, not caring about the momentary gains and losses.

Motivation for Saving in Mutual Funds: Netnography Study on Bibit Instagram Posts

Developments in technology and information make it easier for Millennials and Z generations to access investment information and make investments through smartphones. Mutual fund investment can be the best alternative choice for beginners who want to start investing because mutual funds are investment products that are relatively easy to understand and accessible to anyone. In this regard, the use of digital platforms and applications makes the mutual fund investment transaction process faster and simpler, one of which is the Bibit application. The Bibit application is a platform used for mutual fund investment that provides mutual fund purchases with an affordable investment nominal.The purpose of this study is to analyze and describe the reasons Millennials and Z generations are motivated to save mutual funds in the Bibit application. This type of research uses netnography research with a qualitative approach. Data collection techniques by extracting comment content on Bibit Instagram posts. Meanwhile, data analysis used comment content analysis on Bibit Instagram posts and thematic analysis using Atlas.ti. The results showed that people's motivation to invest in the Bibit application was due to several factors including 1) self-control, 2) financial parenting, 3) financial management, 4) financial allocation, 6) investment, 7) profit, 8) addiction to saving, 9) financial freedom, 10) well-being. The results of this study can practically be used by future researchers to analyze online community interactions, especially mutual fund investment analysis in the Bibit application using the netnographic method for initial in-depth studies as a provision for conducting field research.

The Bank of Japan’s exchange traded fund purchases: a help or hindrance to market efficiency?

We examine the impact of the Bank of Japan’s exchange traded fund (ETF) purchases on two aspects of market efficiency—long-range dependence and price delay—of the TOPIX and Nikkei 225 indices. An increase in ETF purchases results in lower long-range dependence for both indices while the impact on the price delay varies according to index and measure. A sub-period analysis shows that the impact on market efficiency varies over time, with the dominant pattern being a delayed harmful effect, followed by a positive impact and thereafter a negative effect. The implications of these findings are discussed.

The impact of Bank of Japan’s exchange-traded fund purchases

The Bank of Japan (BOJ) enhanced its large-scale asset purchases in October 2010 by purchasing equity exchange-traded funds (ETFs). This study is the first to demonstrate that the BOJ provides downside protection for stock prices through the countercyclical purchase of ETFs. The BOJ responds to a large negative stock return during the overnight and morning periods, and submits purchase orders during lunchtime. Using the BOJ’s March 2020 announcement of doubling the annual purchase amount during the COVID-19 pandemic, this study also finds that the announcement effect is small and temporary. In contrast, the flow effect of the actual purchases is significant and increases. The BOJ’s countercyclical ETF purchase prevents equity risk premia from rising during an economic downturn.

Influencing Factors of Change Rate of Individually Held Fund Units in Equity Funds

Funds are one of the most actively traded instruments in China’s security market, and individual investors are the main force in fund purchases. A study of the factors affecting the change rate of individually held fund units in equity funds is conducive to the healthy operation of funds. This article uses the panel model to study the annual data of 120 funds from 2017 to 2021 as a sample and finds that the change rate of individually held units in equity funds is negatively correlated with fund performance, fund investment concentration and establishment year. This article also uses quadratic and segmented regressions to study the quadratic and segmented relationships between fund performance and dependent variables and use them as a basis to analyze the causes of "redemption anomalies".

The Bank of Japan’s equity exchange-traded funds purchasing operation and its impact on equity returns

The Bank of Japan (BoJ) conducts an unconventional monetary policy that includes exchange-traded fund (ETF) purchases, which can be expected to affect aggregate equity indices. As equity ETF purchases represent a unique and exceptional monetary policy framework, there are few studies on how such purchases have affected the stock markets or the real economy. The motivation of this paper is therefore to reveal the effectiveness of the BoJ’s equity ETF purchases and contribute to the broad literature on unconventional monetary policy by providing new insights. Ordinary least squares regression analysis is conducted to examine the effects of the BoJ’s ETF purchases and determine whether they are predictable, the effect of expected versus unexpected purchases on aggregate equity indexes differs, and price effects are long lasting. Since the October 2014 increase in the annual volume of ETF purchases by the BoJ, such purchases have become less predictable. Expected purchases do not affect prices, whereas unexpected purchases have a significant, positive price impact. However, this impact is found to be temporary in nature.

Equity Unit Trust Funds Flow and Stock Market Returns

This study sought to evaluate the relationship between equity unit trust fund flows measured as purchases and sales and the Nairobi Securities Exchange (NSE) stock market return. The study employed Vector Autoregressive model and tested for Granger causality using monthly data for the period starting January 2010 to December 2017. The granger causality results showed that equity fund sales contain information that can explain stock market return and stock market return contain information that can explain equity fund purchases thus unidirectional causality. Impulse response results showed that equity fund purchases have a predominantly positive relationship with NSE stock market return and NSE stock market return have a positive relationship with equity fund purchases. This implies that an increase in stock market return will lead equity fund managers to purchase more securities and as the equity fund purchases increase, the demand for those stocks will increase causing the stock prices to increase and consequently increase stock market return. In contrast, equity fund sales are predominantly negatively related with stock market return and stock market return is also negatively related to equity funds sales. As the stock market return increase, the equity fund managers will decrease their sales. As the sales increase, the supply for those stocks will increase causing a decrease in prices and consequently a decrease in stock market return. Equity fund sales explain the variation in stock market return more than equity fund purchases while stock market return is a determinant of equity fund purchases and equity fund sales.

Do investors show an attentional bias toward past performance? An eye-tracking experiment on visual attention to mutual fund disclosures in simplified fund prospectuses

This study examines the cognitive processes underlying investors’ extrapolations of past fund performance and whether investors’ attention patterns may explain their return-chasing behaviors. We measured the attention that investors paid to mutual fund disclosures in a simplified fund prospectus using unobtrusive infrared eye tracking. Results suggest that prior fund performance, which is normatively irrelevant information and not useful in predicting future performance, received considerable attention from investors. More interestingly, the impact of prior fund performance on investors’ purchasing intentions was fully mediated through expected returns and attention paid to past performance information. The results indicate that investors apparently believe in performance persistence or in a ‘hot hand’ effect, and that mutual fund purchases are driven by salient information such as superior performance. Moreover, we tested the disclaimer mandated by regulatory bodies, which warns that past performance does not guarantee future results. We found that the disclaimer was ineffective in reducing investors’ extrapolation biases, despite the fact that the disclaimer was attended to and properly encoded by investors.

Price changes around hedge fund trades: disentangling trading and disclosure effects

Previous studies find positive stock market reactions around announcements that hedge funds own large equity stakes in companies and use this evidence to support the hypothesis that hedge fund activism creates value. A concurrent explanation is that the price reaction reflects, at least in part, the market impact associated with hedge fund trades. We exploit the blockholder’s legal filing requirements with the Italian regulatory authority (CONSOB) to separately examine trading and disclosure effects associated with hedge fund trades. Trading effects are related to hedge funds’ buying activity on the market, whereas disclosure effects are related to the possibility that the market anticipates future activism and reacts to the announcement of hedge funds’ ownership. The trading effect is significantly larger than the disclosure effect. This result implies that the price impact associated with hedge fund purchases explains a large portion of the price reaction attributed exclusively to hedge fund activism in previous studies. We also find that trading by hedge funds produces a permanent change in the stock price, which occurs in equal part both prior to and concurrent to the trading activity. The execution strategy used by hedge funds to accumulate their position (on exchange or downstairs trading vs. block trading or upstairs) affects both the size and the temporal distribution of the trading effect.

Price Changes Around Hedge Fund Trades: Disentangling Trading and Disclosure Effects

Previous studies find positive stock market reactions around announcements that hedge funds own large equity stakes in companies and use this evidence to support the hypothesis that hedge fund activism creates value. A concurrent explanation is that the price reaction reflects, at least in part, the market impact associated with hedge fund trades. We exploit the blockholder's legal filing requirements with the Italian regulatory authority (CONSOB) to separately examine trading and disclosure effects associated with hedge fund trades. Trading effects are related to hedge funds’ buying activity on the market, whereas disclosure effects are related to the possibility that the market anticipates future activism and reacts to the announcement of hedge funds’ ownership. The trading effect is significantly larger than the disclosure effect. This result implies that the price impact associated with hedge fund purchases explains a large portion of the price reaction attributed exclusively to hedge fund activism in previous studies. We also find that trading by hedge funds produces a permanent change in the stock price, which occurs in equal part both prior to and concurrent to the trading activity. The execution strategy used by hedge funds to accumulate their position (on exchange or downstairs trading vs. block trading or upstairs) affects both the size and the temporal distribution of the trading effect.

Whose Money is Smart? Mutual Fund Purchases of Private Investors

This paper contributes to the growing body of literature on mutual fund purchasing decisions, smart investment decision making and household finance. By using administrative data allowing for an empirical analysis on investor-specific level we derive three key findings. First, it is shown that lacking investor sophistication is the dominant driver preventing investors from chasing historical performance. Second, we find that smart investment decisions are made by investors that are older, more experienced, wealthier and less overconfident. Financial advice only improves fund selection if initial charges are not taken into account. Third, evidence on the economic impact of smart decision making is provided, pointing out that smart investor realizes an on average 127bp higher portfolio return per year.

Fight Or Flight? Portfolio Rebalancing by Individual Investors*

This paper investigates the dynamics of individual portfolios in a unique dataset containing the disaggregated wealth of all households in Sweden. Between 1999 and 2002, we observe little aggregate rebalancing in the financial portfolio of participants. These patterns conceal strong household-level evidence of active rebalancing, which on average offsets about one half of idiosyncratic passive variations in the risky asset share. Wealthy, educated investors with better diversified portfolios tend to rebalance more actively. We found some evidence that households rebalance towards a higher risky share as they become richer. We also study the decisions to trade individual assets. Households are more likely to fully sell directly held stocks if those stocks have performed well, and more likely to exit direct stockholding if their stock portfolios have performed well; but these relationships are much weaker for mutual funds, a pattern which is consistent with previous research on the disposition effect among direct stockholders and performance sensitivity among mutual fund investors. When households continue to hold individual assets, however, they rebalance both stocks and mutual funds to offset about one sixth of the passive variations in individual asset shares. Households rebalance primarily by adjusting purchases of risky assets if their risky portfolios have performed poorly, and by adjusting both fund purchases and full sales of stocks if their risky portfolios have performed well. Finally, the tendency for households to fully sell winning stocks is weaker for wealthy investors with diversified portfolios of individual stocks.

Myrna Loy: Co‐Principal Investigator

Myrna Loy: Co‐Principal Investigator

Stock Selection Skills and Career Choice: Buy Side vs. Sell Side

Theory suggests the most profitable way to exploit stock picking skill is to set up an investment fund, yet in practice buy-side and sell-side stock analysts coexist. We examine the relative merits of stock picks from institutional investors and brokerage analysts, and the extent to which institutions use sell-side analysts' recommendations. We find that sell-side analysts' recommendations are informative. Although mutual fund purchases significantly outperform their sales the difference, in performance is largely concentrated on the day of the trade. Mutual funds tend to trade in the direction of recommendation revisions but their trade direction is not incrementally informative.

Regional group purchasing of vaccines: review of the Pan American Health Organization EPI revolving fund and the Gulf Cooperation Council group purchasing program

This paper reviews the key design features, accomplishments of and lessons learned from two regional group procurement mechanisms dealing with vaccines that have been in operation for more than 25 years. The Pan American Health Organization (PAHO) EPI Revolving Fund purchases vaccines and immunization supplies on behalf of more than 35 countries in the Latin American and Caribbean region. Based on a 'central contracting' model, the program handles most aspects of procurement-from tendering to contracting with and paying producers--using a common fund to pay producers before being reimbursed by countries once goods are received in-country. The Gulf Cooperation Council (GCC) Group Purchasing Program among seven Persian Gulf States issues joint tenders for vaccines, as well as drugs and other medical goods. Through this 'group contracting' program, countries are responsible for contracting with and paying producers on their own, once the group has selected winning bids. Both programs have experienced substantial growth in the past two decades and are considered to have contributed to or accelerated achievements of immunization programs in both regions, including the introduction of new vaccines. The paper identifies several features of both programs--both those designed to attract country participation and those designed to ensure the programs' financial viability--which help explain their success and longevity.

Junior must pay: pricing the implicit put in privatizing Social Security

Proposals that a portion of the Social Security Trust Fund assets be invested in equities entail the possibility that a severe decline in equity prices will render the Fund’s assets insufficient to provide the currently mandated level of benefits. In this event, existing taxpayers may be compelled to act as insurers of last resort. The cost to taxpayers of such an implicit commitment equals the value of a put option with payoff equal to the benefit’s shortfall. We calibrate an OLG model that generates realistic equity premia and value the put. With 20 percent of the Fund’s assets invested in equities, the highest level currently under serious discussion, we value a put that guarantees the currently mandated level of benefits at one percent of GDP, or a temporary increase in Social Security taxation of, at most, 20 percent. We value a put that guarantees 90 percent of benefits at .03 percent of GDP. In contrast to the earlier literature, our results account for the significant changes in the distribution of security returns resulting from Trust Fund purchases.

The value of open spaces in residential land use

The preservation of open spaces has become an important policy topic in many regions. Policy tools that have been used include: cluster zoning; transferable development rights; proposed land taxes to fund purchases of remaining open spaces; and private organizations that buy land. This paper develops a theoretical model of how different types of open spaces are valued by residential land owners living near these open spaces, and then, using a hedonic pricing model, tests hypotheses concerning the extent to which these different types of open spaces are capitalized into housing prices. The empirical results from Howard County, a rapidly developing county in Maryland, USA, show that “permanent” open space increases near-by residential land values over three times as much as an equivalent amount of “developable” open space. This methodology can be used to help inform policy decisions concerning open space preservation, such as effectively targeting certain areas for preservation, or as a means of creative financing of the purchase of conservation easements, through the increase in property taxes, resulting from the associated increase in property values.

The Information Content of International Portfolio Flows

We examine the forecasting power of international portfolio flows for local equity markets and attempt to attribute it to either better information about fundamentals on the part of international investors, or to price pressure. Price pressure is a potential explanation because flows have positive contemporaneous price impacts and are strongly positively autocorrelated. We find that cross-border flows forecast both individual country equity market prices and associated US closed-end country fund prices, even after controlling for closed-end fund purchases. Cross-border flows have no discernable impact on the difference, the closed-end fund discount. This fact is consistent with the information story, which says that cross-border inflows predict no change in the discount, but forecast positive changes in both net asset values and closed-end fund prices. This fact also contradicts the price pressure story, which predicts that cross-border inflows increase local country equity prices, thereby increasing the closed-end fund discount. We also use our approach to test for the presence of trend following in cross-border flows based on relative, as well as absolute returns. Like other studies, we find evidence of trend following based on absolute returns. Interestingly, however, we find also that flows are trend reversing based on relative returns. Flows therefore seem to be stabilizing with respect to notions of relative, but not absolute, value.