Abstract:
China's actively managed public mutual funds have achieved relatively good returns, yet the anomaly of "funds make money, but fund investors do not" frequently occurs. From the perspective of investor behavioral biases, this paper selects open-end actively managed equity funds as samples to empirically examine the impact of fund investors' subscription and redemption behaviors on the investor return gap, i.e., the difference between funds' nominal returns and investors' actual returns. The findings show that: (1) Frequent subscription and redemption by fund investors is a significant factor contributing to the investor return gap. (2) Behavioral biases such as overconfidence, myopia, and lottery preferences drive investors to engage in frequent market timing trades, increasing timing losses and transaction costs, thereby generating the investor return gap. (3) The impact of investor subscription and redemption behavior on the return gap is more significant in fund samples with larger assets under management, general equity funds, funds managed by male fund managers, and funds with higher proportions of individual investors. This paper provides insights for deeply understanding the formation mechanism of "funds make money, but fund investors do not" and promoting high-quality development of the public fund market.
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