Analysis of China's open-ended equity mutual fund performance evaluation

Thesis network: Abstract: This paper uses empirical analysis of 122 open-ended equity fund, the Sharpe ratio, Treynor, Jensen index, the valuation ratio, the M2 measure of the five different styles of fund performance evaluation indicators The independent samples T-test results showed that: different styles of assessment of the performance of equity funds is insignificant, but relatively large performance differences of different strategies, namely the importance of asset allocation strategies.

Keywords:: open-end funds, investment style, investment strategy, performance assessment

I. Introduction
As an investment product, collection of open-end fund investment, expert management, portfolio investment, benefit-sharing, risk sharing and liquidity better advantage of financial products has become the preference of many investors. China's securities investment funds began 20 early 1990s, the China Securities Regulatory Commission "super-normal development of institutional investors" under the guidelines in 2001, China's securities investment fund industry realized the leap-forward development, has become China's securities market on the most important and most influential institutional investors, according to the wind statistics of the database, as of the end of March 2011, about 515 of China's total open stock funds, assets under management reached 1.94 trillion, accounting for about 10% of the market capitalization of A shares, open stock funds in the A-share market to occupy a leading position in scientific and rational assessment of the performance of open-end fund has a very important practical significance, but mostly open-end fund research abroad in the assessment of performance indicators applied directly in the country, especially the news media publicity when tend to fund the net growth rate as a standard to measure the Fund's performance is good or bad, while ignoring the effect of the Fund agreed investment style and investment strategy of fund performance, this study try to compensate for the deficiencies of the current domestic research, to enhance the scientific nature of the mutual fund performance evaluation.

Second, the Research

Open-end fund performance evaluation has been one of the hot issues of theory and practice of community concern, whether it is for investors, regulators, financial advisors, or open-end fund managers have an urgent need for effective evaluation of performance of different types of funds.

Traditional securities investment fund performance evaluation of the net changes in indicators such as NAV, the net growth rate and investment rate of return, but ignore the fund access to the risks incurred by investment income Markowitz, (1952) first used mathematical method to quantify the risk of a single asset or portfolio of assets, investment decentralization can reduce the total risk of the portfolio assets, the mean - variance portfolio selection theory illustrates Subsequently, on the basis of the study Markowtiz Sharpe (1964, Lintner (1965 and Mossin (1966) the introduction of the CAPM risk-free assets on the basis of the CAPM model, some scholars began to consider the risk factors into account in the Fund's performance assessment model, the performance evaluation method to compare classical Treynor Index, Sharpe index, Jensen index, Treynor index used to assess the performance of the portfolio based on the CAPM, only systematic risk can be compensated, so Treynor systematic risk measure that is, the beta coefficient, as the fund performance measure of risk-adjusted factors, Sharpe, the index used to measure the Fund per unit of total risk can get additional compensation index Sharpe, consider the portfolio's total risk in the non-full dispersion of investment and non-securities market, compared with Treynor index is more reasonable, but also invest in one of the most commonly used method in the evaluation of fund performance index Jensen, Jensen (1968), he believes that the excess rate of return based on the excess rate of return of the assets of the Fund and the benchmark portfolio, the regression analysis of the constant can be used as fund risk-adjusted performance, known as Jensen's Alpha value. Jensen Alpha value is first expressed in the form of yield risk-adjusted performance indicators.

Third, in this article, the choice of sample data

Established prior to September 30, 2008, 122 open-ended equity funds (including index funds as the study sample according to the type of investment, combined with its shareholding concentration, holding characteristics will be divided into four main categories: growth, value, balanced, and index funds.

Selected sample interval January 1, 2009 to December 2010, 31, the selected data, including the Fund's NAV, the closing index of the performance benchmark index for the risk-free asset interest rates, we selected banks year deposit rate alternative, taking into account the sample period, the central bank on October 19, 2010 and December 25, 2010, respectively, all financial institutions raised the one-year benchmark deposit rate by 0.25 percentage points. We use the simple average method Adjustment Fund in the sample during the risk-free interest rate of 2.278%.

During the fund NAV growth, January 1, 2009 net backward complex rights, to fund daily NAV indicators of recovery of the right to fund day net rate of change, is calculated as follows:

This can be calculated out of 122 funds selected for the 486 trading day fund day net rate of change indicators. The same time, we calculate each fund's performance benchmark index corresponding yield. BOCOM stock selection, for example, the performance benchmark: 75% of the Shanghai and Shenzhen 300 Index + 25% × CITIC Bond Index, the first calculation of the CSI 300 index in the first trading day of daily yield and CITIC Bond Index daily return, and then follow the 75%, 25 % weight to calculate the weighted average rate of return is the fund corresponding to the daily return of the performance benchmarks.

Fourth, the empirical results and analysis

First calculate the assessment of performance indicators of each fund within the sample interval, and then from the descriptive statistical analysis of the overall classification performance of the Fund, the statistical results in Table 1.

From Table 1, the overall analysis, the risk-adjusted open-ended equity fund earnings index Sharpe ratio and Treynor index is greater than 0, that the Fund can be obtained over the risk-free rate of return over yield. in the fund management capabilities, although the overall Fund to obtain the mean value of approximately 0.0002% of the excess return, but there are large differences between different funds, the Jensen Index in the sample fund the highest and lowest values, a difference of 0.0018 , or from the Fund Jensen index volatility analysis, higher than the mean level of volatility, that the Fund the ability to obtain excess returns are quite different. Share in the free paper download center
Valuation ratios and the M2 measure are similar to the scene with the Jensen Index. analysis from the perspective of investment style, balanced fund's Sharpe ratio is higher than the growth and value, but balanced growth of the Treynor index less. the risk-adjusted revenue between the different styles are different? We used independent samples T-test to five equity funds are on different styles of performance evaluation indicators to be tested, test results such as shown in Table 2, 3 and 4:

From Table 2, 3, and 4 test results shows that the Levene's test between five different styles of assessment of performance indicators that are the same variance, while significant, according to T statistics and test results show that the performance between the different styles there is a big difference between the evaluation index.

Active fund managers and passive fund managers in the performance assessment indicators are different? This thesis is also using independent sample t-tests were used to analyze the independent samples T-test results show that the active funds and index some assessment of performance indicators to obey the same variance between the fund distribution, such as the Treynor index, Jensen index and M2 measure indicators in the 10% test level to reject the same variance assumptions. According to the survey results may indicate that active exist between the mean value of the fund and index fund performance evaluation indicators are significant differences. This also shows that the level of performance of the investment strategy would fund a certain impact.

Fifth, the main conclusions

This thesis is the combination of the Fund's investment style and investment strategy to assess the performance of China's open-ended equity fund. For domestic and foreign scholars during the mutual fund performance evaluation is often a market index instead of the lack of market portfolio method, this article has of improvement, combined with the investment style and investment strategy, compared the performance of the Fund, the following conclusions:
In this paper, the Sharpe ratio, Treynor, Jensen index, the valuation ratio, the M2 measure to fund the five different styles of performance assessment indicators for independent samples T-test, found between the different investment styles of funds in the same assessment of performance indicators there is not much difference. However, if taking into account the Fund's investment strategy and are actively involved investors and passive index investors on their performance in addition to the M2 measure no significant differences, the rest of the indicators there are significant differences. Results show that: different styles assessment of performance of equity funds is insignificant, but the performance differences of the different strategies is relatively large, ie, the importance of asset allocation strategies.


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