Abstract In this paper, we construct one model to test open-ended funds' feedback trading strategy based on style level by using Sharpe model parameter. We make an empirical study on open-ended funds which were set up before 2004.The result shows that all funds almost adopt positive feedback trading strategy. Value fund shows stronger characteristics of positive feedback trading than growth fund. In the bear market, bond fund shows the most prominent tendency of positive feedback trading. However, bond fund and growth fund show the most prominent characteristics of negative feedback trading. Funds with the best past performance will be more likely to adopt positive feedback strategy than those with the worst performance in the next term. The strategy may fail in the bear market, but does well in the bull market.
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Received: 13 May 2009
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