A study on open-end equity fund position and index return

Abstract

This paper focuses on the study of relationship between China open-end equity fund position and the Shanghai Composite Index return. Regressions of Index return against change in equity fund position were studied. Our tests had shown that for funds which invest aggressively in stock market, there is a significant positive relationship between change in mean equity fund position and the index return. It is also proven that the index return correlates with change of mean equity fund position with a one-month lag. However, the impact of change in mean equity fund position diminishes after one month. The most significant contribution of our model is helping investors to predict next month’s index return.