Empirical Research On Investment Strategy And Performance Of Security Investment Funds In China

In recent years, security investment funds developed quickly as institutional investors. The amount and type of these funds increase. The shares issued by the funds and the capital managed by them increased at the same time. The influence of the funds in financial market becomes more important as their development. The operation strategies, the performance and the relationship between them became the focus of the researchers.Though efficient capital market is the expression of competitive equilibrium theory in financial market, there are some anomalies which are violated to efficient capital market. Based on the studies on the psychology and behaviors of the investors, behavioral finance tried to explain these anomalies from another angle. Some investment strategies are formed in this process and the most representative one are contrarian investment strategy and momentum trading strategy.The investment strategies are classified as positive feedback, contrarian and buy and hold three types on the basis of former two kinds. The operation strategies of the funds from 2007 to 2010 are valued through GTM model and the performance is also valued. Then the relationship between the strategies and the performance is studied based on this.Firstly, the background and significance of the paper are introduced in the introduction. Literature review on the operation strategies and performance of the security investment funds are also introduced in this part.Secondly, this paper introduces the development of the security investment funds in China. The role of them is also analyzed in this part. The classification of the operation strategies and the methods that value the performance of investment funds are analyzed on the basis of previous studies.Thirdly, based on the analysis of anomalies in the financial market this paper reviews the studies of behavioral finance on contrarian investment strategy and momentum trading strategy.Lastly, this paper analyzes the investment strategies following the GTM model. The performances of them are also valued on the basis of CM index, rate of return and Sharpe ratio. Then the relationship between the investment strategy and operation performance are valued through Spearman correlation coefficient. The research result shows that the sample of funds tends to buy past winners based on the performance of the stock in current season. However, there is no herding phenomenon on selling behavior of the funds. Based on the performance of stock in last season, the funds tend to buy past winners and sell those stocks with limited climbing space in order to get profits. The funds will get more profits if they buy the past winners from the relationship between the strategies and performance.