Factors Affecting Performance Of Chinese Security Investment Funds

Security investment funds are created to absorb household money and to diversify investment risks. Since SIFs have long history of over 100 years in western countries, the cumulated management experience and related systematic research methods are good examples to learn. Meanwhile the financial environment in China is so different that we cannot simply copy western research methods. Instead, it is crucial to combine classic theories with Chinese reality to evaluate SIFs'performance. Only in this way could we reach a more objective conclusion and find out suitable development strategy.This study attempts to combine advanced research methods with basic situation of Chinese security market and SIFs, to find out specific factors affecting their performance, and finally to provide tailored solutions.Three methods are used in this study: method of induction, deduction and demonstration. This paper divides SIFs'performance into two aspects:time-choosing and stock-choosing. Research on the relationship between performance and scale is also conducted. To explore how much SIFs'stock-choosing ability contributes to performance, an interactive model between stock quality and SIFs'performance is designed. To explore how much SIFs'time-choosing ability contributes to performance, the relationship between performance of SIFs and index is researched. The basic findings include the relationship between SIFs'weight on equity and the index complies with binomial distribution with certain degree of fitting, which mean SIFs'weight on equity increases with the main index and fund managers do not demonstrate significant time-choosing capability. Theoretically small funds could not enjoy economy of scale, while super funds would bring big challenges to fund managers and normally lead to poor performance. This study analyzes what the best scale is and prove this finding with real cases. In the multi-factor regression model, a dummy variable is created to represent the comprehensive market conditions. Other factors are also considered, including stimulation, policy and market structure. These factors do not influence SIFs'...