Study For Multi-horizon Performance Evaluation Of Open-ended Funds Based On Wavelet Analysis

This paper discusses the wavelet method in the financial time series analysis, multi-horizon performance evaluation models are created by using wavelet multi-scale analysis to CAPM. This paper researches on the theory and empirical for the performance evaluation of the open-ended funds in China, and analyzes thorough the study results.At first, the basic theories of wavelet analysis and the open-ended funds'performance evaluation are introduced. Combining the wavelet analysis, multi-horizon performance evaluation system for the open-ended funds has been designed. Fourteen open-ended funds are chosen as samples to do the empirical studies.Secondly, the scale mean and wavelet variance are calculated by using wavelet transformation to returns series of funds, the basic statistical characteristics of them are analyzed in different time scale.Thirdly, by using wavelet multi-scale analysis to capture time-varying characteristics ofβ, system risks (βvalue) of open-end funds are analyzed in different time scale and investment performance of open-end funds are analyzed in different horizon.Fourthly, introducing waveletβand wavelet variance to Treynor Ratio, Sharpe Ratio and Jensen Ratio, three multi-horizon performance evaluation models are obtained. Also introducing wavelet analysis to the traditional models of security selection ability, such as T-M model and H-M model, multi-horizon evaluation of security selection ability has been designed.Finally, the horizontal and vertical evaluation results of the fourteen open-end funds are analyzed in different horizon. Empirical results show that the introduction of wavelet analysis can be effective in evaluating multi-horizon performance evaluation of open-end funds.The shortage and direction of the future research is further discussed at the end.