A Style Analysis Of Chinese Closed-end Funds

In China, Securities Investment funds are springing up in recent years. The number of funds in China is 74 by the end of the year 2003, including 54 closed-end funds. With the dramatic development of fund, the problem to discriminate the style of a certain fund has been put into the agenda of researchers and investors.However, the existing style-announcements made by the funds themselves are obscure and even misleading to the public. Furthermore, some of them don't have an accurate definition of the style. Therefore, it is quite hard for the investors to discriminate the fund and choose fund according to the preference of their own. Moreover, the misunderstanding of the investment style will result in a lack of the platform on which the performance assessment is based.The goal of style analysis is to discriminate fund from each other through the practical style reflected from their investment behavior. First, it is self-evident that the final goal of style analysis is to help the investors to make a rational investment decision. Second, another use of style analysis is to check out weather the funds are behaving according to their announced style. In other words, to find out if the fund manager fulfill the promise of a certain style to the investors. Third, it will avoid the inconsistency of funds' performance derived by various methods.In this paper, we studied the investment style of 20 Chinese closed-end funds with a method called Return-based Style Analysis (abbreviated as RBSA), which focus on the funds' exposure to the style indexes to show the investment style. The sample period covers the time of 12 quarters from January 2001 to December 2002 for it covers an entire cycle of the security market after the exuberance in May 19, 1999. We analyzed the investment style of the closed-end from an empirical point of view and draw the characteristic of the funds' style.The conclusions from our research are: First of all, the closed-end funds do not have exact investment style. Most of the funds shared the same style during certain period. Second, the investment styles of the funds are not the same as the style they announced. Finally, funds belong to common fund management company often share the same style.Fu Dongsheng (Finance) Directed by-Yang Chunpeng...