The Research On The Performance Of Funds

The ability to practice of funds,that is the ability of stock selecting and market timing,plays an important role in the research of funds' performance.An efficient and accurate measure for the ability of stock selecting and market timing can develop a theoretical foundation for investors,management,and regulators.What more,we could see the significant influence of funds' development in financial market.With the popularity of financing consciousness,a growing number of investors regard funds as an investing tool.In the face of plenty of different kinds of funds,investors should concern on managers' operating performance.As a result,the problem,how to evaluate funds' performance,arises.From this standpoint,we carry out an empirical test on the performance of 66 funds that had issued before 2003,in recent six years, using the classic models on the basis of reviewing both domestic and foreign pertinent literatures.And next,after discussing classic models' limitations,we apply an innovative model to take an empirical test,and make conclusions,as follows:1.The overall evaluation of the funds study shows that there exists abnormal profits as the risk premium,implying a better performance of the funds in the long run,which does not exclude the existence of policy tilt and herding,we also find that open-end fund's performance is relatively stable and the diffusion of closed-end funds. our domestic funds didn't dispersed non-systemic risks well.2.The stock selecting ability of funds is better in the bull market than in the bear, and this is an inevitable result attributable to the effect of funds holding core assets, rather than to the ability of practice.3.Funds management companies with a better stock selecting ability usually show weaker performance with regard to the ability of market timing.Likewise, companies with a better market timing ability,usually have an weaker stock selecting ability.That's to say,funds' stock selecting ability and market timing ability are negative correlated.4.Size from 2 to 3 billion of closed-end funds are better than the small and medium-sized closed-end funds.Actively managed funds can not surpass the market,proposing that value funds and index funds will be the dominant.5.Empirical study shows Treanor's index,Sharpe's index and Jensen's index,basing on SSE Composite Index and Shanghai A Share Index separately,have similar conclusion,indicating close relationship between the two based index.Due to higher non-systematic risk of our capital market,we think it's proper to use Sharpe index as the evaluation criteria.6.With regard to the research methods,the Market returns of either Shangzheng A index or Shangzheng index do not have significant difference,that is,the option of market benchmark does not obviously influence the result.This paper is organized as follows:Chapter 1 is the introduction,stating the background,arrangement,original ideas etc.Chapter 2 presents the literature reviews in detail about the performance of funds. We introduce the general overviews of both national and foreign studies,and analyze the thread about the funds' performance research,as well as historical empirical conclusions.In Chapter 3,we give an description of test models about fund' performance, among which we emphasize Mazuy's TM model,HM model developed by Henriksson and Merton(1981) with a dummy variable,as well as the CL model——an improved HM model with two dummy variables.Chapter 4 presents the empirical test of the funds' performance on the basis of three classic models.Due to the structuring consistence between HM model and CL model,we apply TM and HM to carry on test.In practice,The analysis based on TM model is in the context of the whole market,while the CL model analysis is carried out respectively in the upward and downward phases of the market.And the result is almost the same even if we use two different benchmark market indices,that solves the problem of measurement.In Chapter 5,we development a innovative model to measure the performance of funds.The TM model can not capture the trend of market,and both HM model and CL model exist limitation in the process of designing,so we propose the TM-CL model incorporating the above two models' advantages and reducing their pitfalls. Further,we employ the new model take an empirical test using the data of 66 funds in six years,consequently,supporting our previous conclusions.Chapter 6 lists the conclusions and sets forth corresponding policy advice according to above-mentioned analysis conclusions.The funds except only a few ones across China lack of the market timing ability on the whole.Meanwhile,the ability of stock selecting they display is not of significance,which means funds managers don have the ability of stock selecting in weak-form market of China.In the aspect of policy advice,above all,the essential solution is to improve and develop our securities market by establishing relevant legislation,enforcing regulation and information disclosure,for creating a fair,transparency,and efficient environment.Next,the government should allow short sale and increase new investment products in the right time,to expand funds' investment choice and operating convenience and diversify the risk.At last,to thoroughly eliminate the agency problem,we should enforce the internal management of funds.Funs management companies ought to take the corporate management system and appropriately adjust funds managers' post and/or other similar means,to improve their future performance.Besides,they should promote new types of funds to meet investors' requirement in accord with the market situation and investors' demand,on the basis of careful market research.When the market is in bad times,companies should make full use of its advantage,accelerate the R&D of financial derivatives,and bring in some methods and tools to avoid risk. Moreover,they should take any action to raise the skills and qualities of funds managers.With the change of favorable environment from outside to inside,the great potentiality of funds industry can be fully cramped out.