TITLE:
Economic Policy Uncertainty and Mutual Fund’s Risk Adjusting Behavior in China
AUTHORS:
Zheming Li
KEYWORDS:
Economic Policy Uncertainty, Mutual Fund, Risk Adjusting
JOURNAL NAME:
Modern Economy,
Vol.11 No.3,
March
11,
2020
ABSTRACT: This paper investigates the effect of economic policy
uncertainty on mutual fund’s risk adjusting behavior by using the data of active
management mutual funds operated in 2008-2017 in China. The empirical result shows
a strong positive relationship between economic policy uncertainty and mutual fund’s
risk level. Moreover, mutual funds which performed better in the previous period
are more eager to raise their risk levels when the uncertainty is high. It means
that mutual funds may still take a risk to chase the limited money when the market
sentiment is pessimistic. Our research contributes to the debate of the possible
responses made by investors when market is in high uncertainty. It provides a reference
for properly making policy decisions and accessing mutual funds.