The China’s Investment Fund Performance Evaluation And Impact Factors Research

Securities market is always a fantasy world full of opportunities and risks, whichmakes people of different countries, races, faiths, social classes, and financialresources indulge their passion. The operation charm of securities market lies in theintertwined fusion between speculation and investment. Everyone attempts to explorethe little-known mystery hides behind the "winner takes all". Since the beginning ofthe new century, China’s securities market, both in investment products and the totalmarket value have achieved unprecedented development, thus investors have morefreedom of choice and necessary conditions for them to build a more scientific andrational portfolio. Securities Investment Fund is a typical representative of suchportfolio product. Our investors, particularly those small and medium-sized investorswith limited money generally do not have the professional knowledge of securitiesinvestment theory, and they only rely on the simple experience of long-termparticipation in the securities markets. Thus they tend to have a huge loss, or even"lose everything". Small and medium-sized investors are large and they are not onlythe major participants of securities market, but also participants with strong riskaversion. Fund is responsible by the fund manager and his team with a wealth ofmarket experience, expertise, and trading techniques to fully in-depth research theimpact of investment-related factors and to obtain excess return under conditions ofcontrolled risk. Team-oriented operation of the fund managers in investment andoperation process tends to reduce the probability of "a stupid mistake" and a "seriouserror" greatly compared with ordinary investors.China’s securities investment fund market has received considerabledevelopment in recent years. Funds issued record highs and both single and overallfund scale are unprecedented expansion. The innovation of fund products enrichinvestment species, which makes investors’ demand for asset preservation and appreciation more and more strongly. therefore, we believe that whether theevaluation of the operational status of the securities investment fund is scientific,comprehensive, effective, has become a vital part maintains the healthy and rapiddevelopment of the fund industry in China. To achieve this goal, we must firstestablish a scientific and reasonable evaluation system set adapted our market, whichfully reflects the characteristics of the investment in China’s securities market. At thesame time, we also hope to follow the rules of the market in the legal framework, andestablish a fair, open and authoritative rating agency to perform this function. Butcompared to foreign developed capital market, China’s authoritative rating agencieswith unified industry standard have not yet established. Therefore, despite of the needof market or the integrity of the market building, the explosion of fund performanceevaluation methods must be addressed in the area of securities investment funds.By analyzing historical performance, we can make a reasonable evaluation of thefund manager’s investment operation, and we can test whether the historicalperformance is predictable through continuing analysis and provide effectiveperformance feedback and help investors make scientific and rationaldecision-making through fund performance attribution analysisIn today’s world, globalization has become a mainstream trend, which alsoincludes the "integration" of the financial markets. It brings the development of fundevaluation industry both opportunity and challenges. It can be said that theestablishment of a scientific and reasonable fund performance evaluation system andperformance evaluation method in accordance with China’s market is our fundproblems to be solved. Build a complete performance evaluation system includesperformance evaluation and performance attribution analysis. The performance valueis an important basis for the decision of investors and managers, but the isolatedapplication performance value does not provide us all the information of fundperformance. As participants of the fund, everyone needs to know the specific reasonslead to fund performance differentiation to use these "reasons" to correct thedeviation of fund performance in the operating process, which also provides fundinvestors with reference value for investment choice.In this paper, we investige the fund performance evaluation following performance attribution analysis, finally, the research ideas of policyrecommendations. This paper is divided into five chapters:The introduction focuses on the basic elements of background, the significanceof topic, the research content and structure as well as innovative points of this paper.Chapter1is related summary about fund performance research. In this chapter,we will be combing the results of theoretical studies related to this article content athome and abroad and highlight the main theoretical models and methods of dataenvelopment analysis method, which is the core method of this paper. In this chapter,we focus on the summary of academic achievements.Chapter2compares the evaluation system of securities investment funds. In thischapter, we show a comprehensive development status of fund performanceevaluation industry of domestic and foreign, and make some speculation based onfuture trends. Through comparative analysis, we found that, due to the gap in thedevelopment of market, the maturity of investors, and the information disclosuresystem among China and Western markets, especially the large difference in theconstruction of securities laws and regulations and industry regulatory system,China’s fund performance evaluation system is essentially different from westerndeveloped countries’: first, the different lengths of fund evaluation during. Our lengthis much shorter than developed countries’. Secondly, the different methods of fundevaluation. China generally evaluates through single quantitative method butdeveloped countries generally use a more comprehensive quantitative and qualitativeanalysis. Third, there are also differences in the evaluation mode. China only usesstatic evaluation mode, while the developed countries have developed mature systemto dynamic evaluation model. Through the analysis above, we believe that there is acertain gap with foreign authorities in the development of evaluation concept, of theevaluation methods or the building evaluation system of China’s fund industryperformance evaluation seriously lagging behind the development of China’s fundmarket Therefore, concentrating on building our own fund evaluation system hasbecome urgent.The third chapter is the performance evaluation of China’s investment Fund. Thischapter values fund performance through the application of super-efficiency DEA based on variable returns to scale of panel data, we also establish an evaluation indexsystem based on the profitability of fund, the level of risk, operating costs, the abilityto grow and obtain excess returns and denoise before evaluation to avoid thecontroversy from academia and industry on related issues and make the evaluationmore objective and scientific. Finally, based on such evaluation system, we evaluatedthe performance of41stock funds in China in the sample period. Through empiricalanalysis, the application of the model not only successfully generates value of eachfund’s performance but also achieves value attribution process in model that isefficiency value derives from the surplus of inputs and output elements. From theview of empirical analysis, when the super-efficiency value derives from the surplusof output, the contribution rate is much greater than single inputs savings. The mainfeature different from other DEA methods is Super-efficiency values attributiondistinguish and judgment. From the empirical results of the performance evaluation,we believe that our open-end funds operating level has received certaindifferentiation.The beginning of chapter4is the attribution analysis of fund performanceevaluation. Fund performance attribution analysis is divided into two parts. The firstpart is chapter4, which analysis the impact of the governance structure on fundperformance. This part focuses on the analysis of external factors faced by funds inoperation. In chapter4, based on asymmetric information theory, principal-agenttheory and incomplete contract theory, we analysis the impact of the governancestructure on fund performance through the method of comparative analysis,quantitative method and game theory analysis. The defects of fund governancestructure, that the balance among fund manager, holder and hoster has not established,because the power of fund management side is too strong. We also propose twosolutions: the complement of investors’ interest representatives, the clarity ofpromoters and managers role to prevent overlap and strengthen fund holdersoversight effectiveness, and reduce the independence of hoster. At the same time wefind that the coefficients of ordinary investors’ share and the super-efficiency value offund performance are negatively correlated, and our market exists "redeemed vision".There is a positive correlation between the shares of institutional investors holding and fund performance. The fund company’s own share dose not show significantlysuch characteristics with fund performance. Finally, we use game theory to derive thestrategy of holders’ supervision policy and fund managers’ operating objectivesstrategy.Chapter5is to study the impact of stock selection and timing ability on fundperformance. This chapter focuses on the analysis of the internal factors faced in theprocess of fund operations. In this chapter, we review the classic theory of attributionanalysis method, and establish a planning model based on DEA method andsecond-order stochastic dominance theory which generates the value of fundsmanager relative ability of stock selection and timing effectively. In this way, we cannot only significantly enhance the objectivity of the evaluation process, but alsodetermine the relative strength of timing and stock selection ability based on radialdistance to the efficient frontier. But there is a shortage of the model, that is, themodel can not determine whether the fund indeed has stock selection and timingability but evaluate their relative strength degree. On this basis, we determined theimpact and influence direction of timing and stock selection ability on fundperformance. From empirical results, China’s fund managers generally do not have arelative stock selection ability, but relative timing ability and such ability is the mainfactors affecting the performance of fund. The more timing ability of fund managers,the better fund performance. Finally, we apply the Spearman and Pearson correlationcoefficient to text the persistence of managers’ timing and stock selection ability andthe result reveal that our funds’ timing and stock selection ability are generallysustainable.In the concluding part of this article, we will summarize the empirical resultabove and give appropriate policy conclusions.