On The Predictability Of The Returns Of Domestic Security Investment Funds

Securities investment funds had made a great progress in our country since the late 1980s. Because of its great size, its professionalization of management and its capability of spreading the investment risk, institutional investors and individual investors have paid close attention to it ever since its emergence. As institutional investors, securities investment funds itself can make contribution to the improvement of financial markets and development of finance and economy. As the role it plays is getting more and more important, the question of which factors will affect the rate of return of securities investment funds and if we can predict the securities investment funds returns through business and monetary indicators is getting more and more meaningful.In the beginning of the theoretical analysis part, this article expounds the definition of securities investment funds systemically. Then it analyses the advantages and limitations of securities investment funds combined with our native closed-end funds market. Finally, it focuses on the factors that will affect the return of securities investment funds. In macroeconomic level, the article argues that economic cycles, inflation and deflation, interest rates, fiscal policies and monetary policies, exchange rate and so on will affect the return of securities investment funds. In most cases, fund returns will change with economic cycles simultaneously; serious inflation and deflation will depress the fund returns. Since the interest rate have endogenous and exogenous, it will play an important part on affecting the fund returns. Under normal circumstances, the rising interest rates will drag the fund returns down. Fiscal policy could influence the fund returns in two ways:fiscal revenue and expenditure while monetary policy could do this through money supply. Exchange rate can affect not only the foreign trade corporations but also the domestic cost of production, so it will affect the fund returns a lot. In microeconomic level, this paper argues that company's operating performance, the organizational structure and the managers' professional standards will cause significant effect. Other factors that will affect fund returns include political elements, environmental factors and psychological factors. Warfare, regime change and great change to economic setups may force the fund returns down. Natural disasters and human-caused environmental events will hold-up the fund returns and the mental activity will also change the fund returns to some extent.In the empirical research part, this article verifies the predictability of business conditions, monetary conditions and market conditions to domestic closed-end fund yields. In consideration of discount factors, this article chooses the weighted change rate of closed-end fund net value as the indicator of fund return. It chooses default risk premium and term premium as the indicators of business conditions, rate premium as the indicator of monetary conditions and market risk premium as the indicator of market conditions.It has been discovered that default risk premium and rate premium significantly forecast fund returns and the two indicators have negative correlation to fund returns. Market risk premium has the ability to predict fund returns but have low explanatory ability in explaining changes in future earnings and the volatility of the market risk premium has low power in changing the future yields. During the same period, market risk premium and the fund yields have a significant positive correlation. Term premium have no significant ability to predict future earnings, even if to the trend of future earnings. The fund yield has the ability to predict the future earnings, but has low explanatory power compare to default risk premium and rate premium.The article analyzes the predictability of securities investment funds in both theoretical and empirical methods. In the empirical research component the article selects important economic factors as dependent variable, contacts fund returns with the entire economic situation and discusses the root causes of changes in income of the fund from the macro level. Based on scientific analysis and judgments, this article selects indicators of representative to improve the scientificity of the examination. On account of discount factors of closed-end funds, this article chooses the weighted change rate of closed-end fund net value as the indicator of fund yields which will improve the accuracy of the analysis. These above are the innovations of this article.This article is divided into five parts. The first chapter is an introduction. The chapter introduces the research background first and then it briefly describes the meaning, function and the development of securities investment funds. The chapter also describes the meaning of the writing and the innovation of the article. At last it introduces the relevant research results at home and abroad. The second chapter is the theoretical analysis of factors that will affect the future return of securities investment funds. It describes the meaning, advantages and limitations of securities investment funds and the long-term effects of factors of fund yields in detail. The third chapter is the research method selection and data characteristics. It discusses the choice of methods, the sources and the characteristics of data and the composition of variables. The chapter also constructs the regression model. The fourth chapter is the analysis of regressions. It analysis the predictability of closed-end fund returns using a single variable and multi variable analysis comprehensively. The fifth chapter is the summary of theoretical analysis and empirical study.