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Size and performance of Chinese mutual funds: The role of economy of scale and liquidity

Author

Listed:
  • Tang, Ke
  • Wang, Wenjun
  • Xu, Rong

Abstract

Using a detailed stockholding for a comprehensive sample of Chinese open-end equity mutual funds from 2004 to the first half of 2010, we investigated the effect of economy of scale and liquidity on the relationship between fund size and performance. We find that an inverted U-shape relationship exists between fund size and performance as measured by various performance benchmarks. Both economy of scale and liquidity play important roles in Chinese mutual funds. Furthermore, their combined effect explains the inverted U-shape relationship of size and performance reasonably well.

Suggested Citation

  • Tang, Ke & Wang, Wenjun & Xu, Rong, 2012. "Size and performance of Chinese mutual funds: The role of economy of scale and liquidity," Pacific-Basin Finance Journal, Elsevier, vol. 20(2), pages 228-246.
  • Handle: RePEc:eee:pacfin:v:20:y:2012:i:2:p:228-246 DOI: 10.1016/j.pacfin.2011.09.002
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:pacfin:v:44:y:2017:i:c:p:80-96 is not listed on IDEAS
    2. Yi, Li & He, Lei, 2016. "False discoveries in style timing of Chinese mutual funds," Pacific-Basin Finance Journal, Elsevier, pages 194-208.
    3. repec:fau:fauart:v:67:y:2017:i:6:p:512-538 is not listed on IDEAS
    4. Benson, Karen & Faff, Robert & Smith, Tom, 2015. "Injecting liquidity into liquidity research," Pacific-Basin Finance Journal, Elsevier, pages 533-540.
    5. Feng, Xunan & Zhou, Mingshan & Chan, Kam C., 2014. "Smart money or dumb money? A study on the selection ability of mutual fund investors in China," The North American Journal of Economics and Finance, Elsevier, vol. 30(C), pages 154-170.
    6. repec:eee:touman:v:36:y:2013:i:c:p:650-657 is not listed on IDEAS
    7. Zou, Liping & Tang, Tiantian & Li, Xiaoming, 2016. "The stock preferences of domestic versus foreign investors: Evidence from Qualified Foreign Institutional Investors (QFIIs) in China," Journal of Multinational Financial Management, Elsevier, vol. 37, pages 12-28.
    8. Mamatzakis, Emmanuel & Xu, Bingrun, 2016. "Managerial attributes and equity mutual fund performance: evidence from china," MPRA Paper 76139, University Library of Munich, Germany.

    More about this item

    Keywords

    Chinese mutual funds; Size; Performance; Economy of scale; Liquidity;

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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