The Comparison Of Performance Between Active And Passive Funds In China

Because of their risk diversification, low cost, delay tax, regulatory convenience, avoidable risk management of individual stocks selection and market timing, and other aspects advantages, passive funds develop rapidly in the market of the securities investment funds, and made slightly return on investment which more than the market benchmark through the full investment, lower costs and highly dispersed risk. However, under this situation of low efficiency of China's securities market, the fund managers believe that they have ability to beat the market by virtue of their investment experience and their ability of professional stock selection and market timing selection, so active funds is still the mainstream of market. But, if really as active fund managers do? Which is much better between active and passive funds performance, and why? Based on the above issues, the active funds and passive funds are compared, their ability of the timing stock selection were measured in this paper, and at last we compared the significant of difference between the active funds and passive funds.In this article, a number of indicators are chosen and the method of factor analysis is used to extract the comprehensive performance indicators and compare them based on the study of fund performance at home and abroad. Meanwhile, the stock market from 2007.01 to 2010.01 is divided into four stages according to the daily Shanghai Composite Index, and then we compare and analyze the integrated performance using independent sample T-test. The main conclusion is that: Though the statistical test results did not show significant differences, the performance of active funds is slightly better than passive funds in the first phases. However, passive funds have significantly better performance than the performance of active funds in the last phase.Next the article explains the results of the above study. First, the article shows the quantitative analysis of the ability of stock selection and market selection of active funds and passive funds and concludes that most of the active funds did not show the ability of stock selection and market timing, even if some funds does show the ability of stock selection and market timing, which does not significant. In other words, the active funds do not show the ability of stock timing selection based on their own ideas which leads to the losing against the passive funds. Meanwhile, the article compares the ability of stock selection and market timing of the active funds and passive funds. The conclusion is that there are not significantly differences in the stock timing ability between of the active funds and passive funds. Secondly, this article also analyzes qualitatively the effects of other factors such as market conditions, turn over ratio, fund size and rates and so on.