【Research Report】Time-series analysis of Japanese mutual fund performance: Considerations on asset flow and return


In Japan, various institutional reforms have been made to promote “a flow from savings to investments.” The ratio of “cash and deposit” to the financial assets of Japanese households is still higher than the US and Europe, but the importance of self-asset building is gradually taking root, allowing preparations for pension savings in Japan’s aging society. Therefore, mutual funds, which can easily make “long-term, accumulation, and diversified” investments as a means of asset formation, will play an increasingly important role. This paper, therefore, looks at the main trends in the Japanese open-end fund market over the past 20 years and then uses time-series analysis focusing on asset flow and return to analyze Japanese open-end funds overall and by product category. Net asset value (NAV) was broken down into net asset value per share (NAVPS) and the unit number, and the relationship between percentage changes in NAVPS and the changing rate of the unit number was examined. The results show that the explanatory power of the previous or current month’s percentage change in NAVPS on the changing rate of the unit number for the current month was generally high. For example, when NAVPS of “Japanese stock” rises or falls for the current month it is likely that the unit number slightly decreases or increases, respectively, for the same month due to contrarian selling or buying, so “Japanese stock” tends to be traded by observing short-term price movements. And when NAVPS of ”Global stock (non-hedge)” or “Mixed” rises or falls for the previous month, it is likely that the unit number slightly increases or decreases, respectively, for the current month, due to trend-followers’ buying or selling, so “Global stock (non-hedge)” or “Mixed” seems to be traded in a trend-following investment stance for a longer period than “Japanese stock”. Therefore, investors may tend to take a different investment stance such as trend-following or contrarian decision-making depending on the category of the funds.

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