China's Securities Investment Fund Performance Persistence

With the gradual improvement and maturity of china's securities market, securities investment funds as common investment tools are given more and more attentions by supervision and regulation department and investors. In recent years, securities investment fund has been one of the dominant investment products with the continuously growing of mutual funds'scale and the kinds of investment tools and the numble of fund companies in addition to the perfect of legal system of security market. Therefore, mutual funds play a key role for promoting the further development of china's security market. To evaluate the performance of mutual funds reasonably is related to investors'investment decision and the formation of value investment philosophy and the sense of fund companies'risk management and it is also helpful for supervision and regulation department to control fund managers'behavior so as to they can invest rationally.In view of the above, this paper studied the performance persistence of mutual funds which means that whether the performance is steady and the later performance can reveal the former performance. There are two aspects to study the performance persistence of mutual funds:on the one hand, we can investigate the performance persistence on all funds or on a individual fund; on the other hand, we can investigate performance persistence in short-and medium-term or long term. This paper pay a attention to overall performance persistence of all funds in short-and medium term and long term respectivelyAll open-ended funds were selected as samples which were set up between 2001 and 2008 for empirical analysis. There are 236 funds in total, including 152 equity funds,33 bond funds and 51money market funds. This paper evaluated the proformance persistence from January 2003 to december 2008, and this period was divided to three stages:consolidation stage, rising stage and declining stage. This paper studied the short-and medium term performance persistence in this three stages respectively and long-term performance persistence in the whole period. The empirical results show that money market funds showed strong performance persistence in short term and there wasn't exist significant persistence in equity and bond funds except rising stage in short term; the medium term persistence was stronger than short term's, but it was sensitive to market stage, for example, equity funds showed strong persistence in declining stage while bond funds showed strong persistence in rising stage; there was significant difference between equity and bond funds when consider long term performance persistence, that was equity funds'performance persistence was stronger than bond funds'and it was also stronger than medium term persistence while bond funds' long term persistence was weaker than equity funds'and medium term persistence.Then this paper analyzed influencing factors of performance persistence by regressive analysis. The results showed that the cale exerted negative influence on performance persistence of equity funds and positive influence on bond funds, the number exerted positive influence on performance persistence and the age didn't show significant influence. It can be see that developing more open-ended funds especially increasing the number and expanding the scale of bond funds and controlling the excessive growth of scale of equity funds are key measures for securities investment fund to stabilize its performance and develop steadily.In addition, this paper also analyzed the influence of investment style on performance persistence of equity funds, the results showed that growth funds had strongest performance persistenc and income funds and balanced funds took second place while index funds didn't show significance persistence and reversal.