Proceedings of the 2023 International Conference on Finance, Trade and Business Management (FTBM 2023)

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Holding cash for the better decision? A comparison study of the liquidity management between China and US mutual funds

Authors
You Zhou1, *
1Leeds University Business School, University of Leeds, Leeds, United Kingdom
*Corresponding author.
Corresponding Author
You Zhou
Available Online 30 November 2023.
DOI
10.2991/978-94-6463-298-9_9How to use a DOI?
Keywords
Cash holdings; Risk factors; Mutual fund performance; Fund flows
Abstract

This paper comparatively studies the different implications of the fund cash holding for fund strategies, flows and performance between China and the US. I use the R-square decomposition technique to examine the determinants of cash holdings. I find that funds in China show more concerns on the non-risk factor than the risk factor in determining the cash level, while US funds show more concerns on risk factors. Funds in the US tend to title their portfolio to lower risk loading and reduce the systematic risk than the funds in China. The abnormal cash holdings can attract money flows in both these two markets. It positively predicts performance in the US and the predictive power is enhanced by the smart money effect. The paper suggests that abnormal cash holding is an essential perspective to be considered in investors’ fund decisions.

Copyright
© 2023 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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Volume Title
Proceedings of the 2023 International Conference on Finance, Trade and Business Management (FTBM 2023)
Series
Advances in Economics, Business and Management Research
Publication Date
30 November 2023
ISBN
10.2991/978-94-6463-298-9_9
ISSN
2352-5428
DOI
10.2991/978-94-6463-298-9_9How to use a DOI?
Copyright
© 2023 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

Cite this article

risenwbib
TY  - CONF
AU  - You Zhou
PY  - 2023
DA  - 2023/11/30
TI  - Holding cash for the better decision? A comparison study of the liquidity management between China and US mutual funds
BT  - Proceedings of the 2023 International Conference on Finance, Trade and Business Management (FTBM 2023)
PB  - Atlantis Press
SP  - 75
EP  - 93
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-298-9_9
DO  - 10.2991/978-94-6463-298-9_9
ID  - Zhou2023
ER  -