Fund Positions Strategy Empirical Research

Securities investment fund is an investment vehicle or structure that features profit and risk sharing. In this structure, the fund management company pools together investors' money by issuing fund units. Fund trustees, usually qualified banks, are in charge of the custodian of the money. Fund managers operate and manage the fund, investing in financial assets such as stock or bond. Fund managers and investors share the profits and risks. By structure, securities investment fund can be divided into closed-end funds, open-ended fund, ETF and LOF; or by financial assets they can be divided into stock fund, bond fund, index fund, mixed fund, hedge fund and money market fund. China's fund management industry has undergone a rapid development in the past ten years, and has been playing an ever important role in today's market. The first fund in China was launched in 1998, and there were only five fund management companies, with a total asset under management (AUM) of about 107 billion Yuan at the time. Now there are a total of 626 funds, including 353 stock and 168 mixed funds. They together have issued 2.35 trillion outstanding shares. Currently three main players, domestic fund managers, joint ventures and QFII, are competing in the A-share market.As important market participants, fund companies'behaviors have inevitably drawn close attentions from other participants. The study of fund has become a hot topic for both market practitioners and academic researchers. At present, however, the academic research focuses on the method of fund performance evaluation, which makes use of Jason, Treynor, and Sharpe index method, to evaluate a fund's skills in stock picking and market timing. There lacks a systematic and comprehensive research in fund investment strategy research, especially in fund position related strategy. For this reason, this paper chooses stock fund as research object and studies the fund position strategy by means of empirical methods such as regression and simulation. This paper is divided into five chapters.The first chapter brings up the research topic through a survey of the background. Meanwhile, it sets up the analysis frame and pays special attention to the diversity and practicality of our research methods. Both historical logic reasoning and quantitative empirical simulation are discussed, including not only statistical methods such as correlation matrix and regression, but also more complex methods such as optimization model. In addition to an emphasis on the theoretical exploration, it also pays attention to the practical value of investment market.The second chapter details the current situation of fund strategy research in both domestic and international markets. We systematically sort out and analyze the relevant funds strategy research, especially the literature on position strategy fund. Starting from foreign related research, we reviewed through studies from abroad, and the major research foreign explanation methods and evaluation model. Then, on carding domestic related literature review and obtains the defects of the existing research and worth used for reference.The third chapter analyzes the relationship among economic cycle, stock market volatility and fund strategies by following three threads, which are the influence of economic cycle on fund position strategy, the influence of economic cycle on stock selection strategy, and the effects of stock market volatility on fund strategy. In the first part, through the correlation analysis and the empirical analysis of the regression inspection, we reach the conclusion that the economic performance has a positive impact on fund position. The more rapidly the economy grows, the higher the fund position, and vice versa. In the second part, through the analysis of the dynamic adjustment and relationships among GDP trends, fund industry investment distribution and top ten stock holdings by funds of each period, we reach the conclusion that funds tend to invest in different industries and stocks in different period of economic cycle. In the third part, through the correlation analysis, empirical analysis and the inspection of regression equation, we conclude that the stock market volatility has a positive influence on fund position. A bull market leads to an increase in fund position, and vice versa.The fourth chapter uses a multi-factor model as theoretic basis to build optimization models to simulate the change in fund position and compares the simulation results with the Shanghai stock index, with funds'assets being a factor. The comparison results have confirmed that fund position is an important signal for analyzing and predicting market confidence and trends. However, the synchronicity of fund position and the Shanghai stock index and the rapid rise or fall of fund position also show that fund investment style is trend-following rather than value-based. Finally, by comparing the simulation results with published quarterly positions for error analysis, we find the risk of model error to be small. Therefore, the optimization model has practical value.The fifth chapter summarizes this paper, points out the shortcomings of it, and proposed the future research direction.