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

  • 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)

Registered author(s):

    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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    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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    1. Chevalier, Judith & Ellison, Glenn, 1997. "Risk Taking by Mutual Funds as a Response to Incentives," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1167-1200, December.
    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. Hansen, Bruce E, 1996. "Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis," Econometrica, Econometric Society, vol. 64(2), pages 413-30, March.
    4. Bruce E. Hansen, 1997. "Threshold effects in non-dynamic panels: Estimation, testing and inference," Boston College Working Papers in Economics 365, Boston College Department of Economics.
    5. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    6. 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.
    7. 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.
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