A Study On Mutual Fund Behavior And Its Performance?Ability And Crash-risk

The past forty years have witnessed rapid economic development and rapid growth in the wealth of residents.Residents' enthusiasm for investing in mutual funds is also increasing.This article examines mutual fund's behaviors,capabilities,and its investment risks,the conclusions of this paper are of great significance to fund regulator and fund investor.This paper empirically studies the relationship among mutual fund behavior,fund's performance,investment ability and its crash risk.This paper's results indicate that portfolio concentration has a significant positive impact on its performance and a significant negative impact on its crash risk aswell.High portfolio concentration is significant positive related to its investment ability(stock selection and market timing).Although the fund can improve its performance and reduce crash risk by increasing its portfolio concentration,further research found the pleasing effect on crash risk is diminishing marginal,the optimal level of portfolio concentration is0.042.This paper also empirically studies the influence on fund's performance and crash-risk when equity-funds heavily hold the stocks heavily held by its or other fund-families.The paper explaind these from the perspect of timing and stock selection abilities of the funds.The results indicate that equity-funds that heavily hold the stocks heavily held by its or other fund-family can both obtain a remarkable excess market return(capm-alpha),but only the latter can obtain significant excess return(carhart4_alpha and ff3_alpha)adjusted by multiple risk factors,but these are at the cost of bearing more crash-risk.Further study shows that both of the funds have good stock selection ability and bad timing ability,but the former is worse on timing;Compared with former,heavily holding stocks heavily held by other fund-family bears more crash-risk.Then this paper empirically studies the relationship between the cross-shareholding behavior of fund-family,mutual fund's performance and its crash risk.Cross-shareholding behavior within fund-family can reduce internal disagreement,increase stock returns,increase stability of portfolio,thereby improving fund performance and reducing the risk of crash.After controlling variables at different levels and using different measures of performance and crash risk,the results indicate that the cross-shareholding level of stock fund with its family has asignificant positive impact on its performance and a significant negative impact on its crash risk as well.Further study found that cross-shareholdings raised fund performance and reduced the risk of crash,neither because the fund has better stock picking capacity or because the fund's cross-shareholdings triggered other investors to follow to push up the stock price.Our conclusion is still robust after controlling many possible endogenous problems.Complex and close networks are among the various economic entities in the financial market.This paper constructs the fund multi-value networks through the cross-shareholding of the funds and studies the relationship among the fund's networks,fund investment performance and ability and the crash risk of fund.After controlling the variables at different levels,we found that the more center the equity-fund located in its fund networks(with higher point centrality),the better performance of the equity-fund,which is mainly due to its good stock picking ability;the equity-fund with higher betweenness centrality also has good performance,but mainly because of its ability of timing the market;compared with the equity-fund with higher betweenness centrality,the fund with higher point centrality can get a better investment performance.Further research found that the fund with higher point centrality(located in more central position)bears less rish of crash;the fund located in the "intermediary" position(with higher betweenness centrality)bears more crash-risk.This paper highlights the concept of fund's NAV synchronization and empirically studies the relationship between fund's portfolio characteristics and fund's NAV synchronization with market.To a certain extent,fund's netvalue synchronization reflects not only the convergence between fund performance and market fluctuation,but also the system risk shared by the fund.The results indicate that fund netvalue synchronization increases when fund has more cross-shareholdings within fund-family,but weakens significantly when fund heavily holds stocks heavily held by its fund-family.Further research found that the marginal effects of cross-shareholdings and heavily shareholdings are diminishing.Further more,this paper investigates the relationship among the equity-fund's netvalue synchronization with its family,fund's capability and risk(performance,timing,stock-picking ability and crash risk),and we constructs a FOF strategy accordingly.After controlling variables at different levels,the results indicate that: the stronger fund's netvalue synchronization with its family,the worse performance and more crash risk of thefund;the stronger synchronization with family indicates fund's worse timing ability and bad stock selection.In a fund-family,the stronger synchronization with its family,the worse capacity of the fund.Accordingly,we construct a FOF strategy,which can obtain high excess return.The conclusions of this paper are of great significance to fund evaluation,fund manager and fund investor.This research not only highlight the need for the CSRC to amend the "double ten" limit,but also remind investors to fully understand the behaviors of fund and its family and should be rational when making investment decision.