| Since there has been, securities investment funds around the world have been developing rapidly. With the continuous development of Chinese securities market, the size of securities investment funds is gradually expanding. According to "The Statistical Report of the China Securities Investment Fund Industry in 2008" issued by the Chinese Galaxy Securities Funds Research Center,China's securities investment funds'net asset size reached to 1.89 trillion yuan, size of shares 2.46 trillion copies, formal operation funds 476, and fund management companies 60.An increasing number of ordinary investors are receiving this investment instruments. As important institutional investors, securities investment funds also have an important impact to the development of Chinese securities market. Generally the investors choose the fund based on the historical performance. The presupposition of such investment strategy is that funds'performance is significantly and persistently, and historical performance can predict the future performance. However, if for some reason in itself leads to a biased measure of fund performance, fund performance, even if it can come up with the conclusions of a continuing nature, this investment strategy may not be effective (Cuthbertson and Nitzsche,2008). Therefore, studying of the fund performance deeply has important and practical significance.The reasons that lead the bias to the evaluation of the funds'performance due mainly to the survivorship bias effect and the market climate bias effect. Due to various reasons, some of the funds may be delisted, be merged or be split, viewing from the end of sample period. These funds are either no data or too little data, or inconsistent to the survival funds. If put these funds out of the sample, then some valuable information they provided will be lost, fund performance evaluation bias may occur, this effect is the survival bias effect. In the bull market, even if the fund manager'ability in general, randomly selects a portfolio; the fund can also get a higher returns. In the case of the capacity of fund managers is on the same level, the fund's returns in a bull market is much higher than during the bear market period, so that the market climates which the fund corresponding to may also lead to performance evaluation bias (Cuthbertson, etc.,2008). For example, in Carhart four-factor model, the information provided by the market excess return factor, scale factor, the value factor and momentum factor reflect the market climate conditions, while the general performance indicators not fully consist of the risk factors, so the given performance may be bias. The bias leading by neglecting the market climate information is the so-called market climate bias effects (Scholz and Schnusenberg,2008).From 2000M1 to 2008M7, we had 23 closed-end funds delisted because of expiration, accounting for 40.35%of the total closed-end funds. However, the existing studies have ignored the possible survivorship bias effect of closed-end fund, so the results of the performance and the performance persistence may be bias. Since the open-end funds in China developed late, has yet to delist from the market, survivorship bias effect does not exist. But this does not mean that the ^open-end fund in China not exist performance evaluation bias. Because of the volatile stock market, a huge difference between the market climates, the performance evaluation of open-end fund in China may face a significant market climate bias effect. So far, there were no studies focuses on open-end funds' "market climate bias effect" in China. If the market climate bias effect exists, then the commonly used indicators of fund performance may not be the true measure and the consistency of the performance sorting may also be affected. Investors used the information provided by the common performance indicators can not make suitable investment decisions. The issuance of the closed-end fund suspended after 2002, and even in the past two years there is a small number, the market climate bias effect may be small. Therefore, the market climate bias effect is mainly directed against the Chinese open-end funds.To sum up we can see that studying of Chinese securities investment fund Performance evaluation bias effect deeply has very important theoretical and practical significance. This paper will discuss the both bias effects faced by the closed-end funds and open-end funds in China respectively. This paper will help measure the performance of Chinese securities funds accurately and its persistence, provides a new perspective to study the Chinese securities investment funds' performance, helps people to choose funds, and also has an important reference value to the regulators and fund management companies.This article considered two common definitions of the survivorship funds: one definition refers to the fund has been alive in the sample periods, a complete sample data of the fund; another is which survives at the end of the sample periods. After analysis of the survival and the delisted funds, we make the following assumption. Hypothesis 1, the performance of the delisted funds portfolio is higher than survival ones; hypothesis 2, the survivorship bias effect of ignoring the delisted fund will underestimate the fund performance; hypothesis 3, different definition of the survival funds may result in different estimates of survivorship bias; hypothesis 4, the different weighting methods may lead to different estimates of survivorship bias. This paper uses factor pricing models and chooses the data of 57 close-end funds from 2000M1 to 2008M7 to investigate the survivorship bias effect of Chinese closed-end funds. The results show that there is a significant survivorship bias effect of performance underestimation for Chinese closed-end funds by ignoring the delisted funds, but it is different from other countries. The disappeared close-end funds are almost small-sized funds, and the majority of them choose the transition of "closed-end fund to open-end fund". This character makes them have better performance before disappearance. It is the main reason of survivorship bias effect. Different definition of "survivorship fund" and different weighted methods can also lead different estimations of survivorship bias.The average excess returns, Jensen a, Fama-French a, Carhart a, Sharpe ratio and Treynor index are all calculated base on excess returns, the excess returns not only reflect the situation of the fund's management, but also includes some information of the market climate (for example MKT, SMB, HML, MOM, and other risk factors). The former depends on the ability of fund managers; the latter reflects the climate of the market, in other words, the risk factors transmit the information of the market climate. This article uses the method of Pastor-Stambaugh (2002), based on the factor loading of four-factor model and the average market risk factor information in the entire sample period, to amend the fund's performance indicators, so that every performance indicator can absorb the market climate information fully. This paper uses Pastor-Stambaugh method and chooses the data of 130 Chinese open-ended equity funds from 2002M1 to 2007M12 to investigate the problem of market climate bias effect of Chinese open-end funds. The result shows that there is a significant market climate bias effect and information on market climate has an important influence on the performance evaluation of funds. After the common performance indexes are modified by Pastor-Stambaugh method and the information on market climate, the errors in fund performance measurement decrease and the inconsistent problem of performance ranking is also improved.The results of the analysis of Chinese securities investment funds' performance evaluation bias effect give us the following revelation. (1). turn to be open-end funds after expiry of the close-end fund can improve the performance and help to improve the efficiency of securities markets. (2). the using of unbiased samples helps to improve the accuracy of studies, effectiveness of regulatory policy and investment decision-making. (3). examining the performance of the Fund should pay attention to the choice of weighting method. (4). in the studies of funds'performance evaluation, persistence and sequencing, we should pay attention to the market climate, attach importance to the impact market climate information on fund performance evaluation. (5). a conditional model has an important significance to the studies of the funds'performance. (6). when making investment decisions the investors should be more reference to the market climate bias effect on the performance indicators amended.In short the main contributions of this paper are as follow. The first, studied comprehensively on the survivorship bias effect of Chinese closed-end funds, and also analyzed the reasons for the survivorship bias effect from the aspect of the delisted funds'performance, the definition of the survivorship funds and the method of weighting methods. The second, conducted a comprehensive inspection to the China's open-end fund market environment bias, used the method of the Pastor-Stambaugh (2002) and environmental information to amended the general fund performance indicators so as to eliminate or weaken the market climate bias effects on fund performance measurement. In the same time, I analyzed the consistency of the ranking among the different indicators, examining the market climate information how to impact on the ranking of funds performance. |
PDF Full Text Request