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The Measurement of the Relationship between Taiwan’s Bond Funds’ Net Flow and the Investment Risk -Threshold Autoregressive Model

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Author Info

  • Wo-Chiang Lee

    ()
    (Department of Banking and Finance, Tamkang University 151, Yin-Chuan Road, Tamsui,New Taipei City, Taiwan, ROC)

  • Joe-Ming Lee

    ()
    (Department of Banking and Finance, Tamkang University 151, Yin-Chuan Road, Tamsui,New Taipei City, Taiwan, ROC)

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    Abstract

    This article applies the threshold autoregressive model to investigate the relationship between bond funds’ net flow and investment risk in Taiwan. Our empirical findings show that bond funds’ investors are concerned about the investment return and neglect the investment risk. In particular, when expanding the size of the bond funds, fund investors believe that the fund cannot lose any money on investment products. In order to satisfy investors, bond fund managers only target short-term returns so as to attract investors, while ignoring the risk. Thus, this paper reminds investors to pay attention to risk, and fund managers should look to fulfill their obligations in addition to the pursuit of profit. Finally, bond funds should have risk management professionals help run the funds.

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    Bibliographic Info

    Article provided by Asian Economic and Social Society in its journal Asian Economic and Financial Review.

    Volume (Year): 4 (2014)
    Issue (Month): 2 (February)
    Pages: 137-149

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    Handle: RePEc:asi:aeafrj:2014:p:137-149

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    Related research

    Keywords: Bond fund; Threshold autoregressive model; Funds’ net flow;

    References

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    1. Hansen, B.E., 1991. "Inference when a Nuisance Parameter is Not Identified Under the Null Hypothesis," RCER Working Papers 296, University of Rochester - Center for Economic Research (RCER).
    2. Shu, Pei-Gi & Yeh, Yin-Hua & Yamada, Takeshi, 2002. "The behavior of Taiwan mutual fund investors--performance and fund flows," Pacific-Basin Finance Journal, Elsevier, vol. 10(5), pages 583-600, November.
    3. Judith A. Chevalier & Glenn D. Ellison, 1995. "Risk Taking by Mutual Funds as a Response to Incentives," NBER Working Papers 5234, National Bureau of Economic Research, Inc.
    4. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
    5. Wo-Chiang Lee & Joe-Ming Lee, 2012. "A Study on Taiwans Bond Market Integrity and Market Timing Ability - Based on The Armax-Garch Model," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 2(8), pages 991-1000, December.
    6. Hansen, Bruce E., 1999. "Threshold effects in non-dynamic panels: Estimation, testing, and inference," Journal of Econometrics, Elsevier, vol. 93(2), pages 345-368, December.
    7. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
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