Investment Style Analysis Of Stock Open-ended Fund

In2001, China’s first open-end fund-"Huaan innovation" was born, marking China’s fund industry has entered a new stage of development, the open-end fund replace closed-end fund and become market mainstream. As an important social investment channels and financial tools, open-end funds in China’s financial markets play an increasingly important role in the increasingly fierce competition between the various funds, in order to obtain fund investors, the company to design the different investment styles and strategies of fund products to meet specific investor risk-return preferences.But the actual operation of the process, due to the presence of asymmetric information, in order to obtain better results, fund managers not able to stick to the agreed investment style, and there have the problem of style drift and style rotation. Style drift affects not only the safety and profitability of the investors of the fund property, and will mislead investors.Overall, the research method is based on portfolio—based style analysis and return based style analysis, or combination of both. Limited by time lag and integrity of the data, portfolio based style analysis did not get a wide range applications. Most abroad studies show that fund has investment style drift, while for China’s market,Empirical results show that China’s fund not only have the existence of style drift, and the style of convergence is also high, while at home and abroad that investment style drift will have an impact on fund performance.The study period begin from January1,2009to April15,2011. I take September30,2009as the dividing point, previours to it is the first stage, coming after or following is the second stage. Based on Gruber four factor model, this paper use return based style analysis to determine fund’s actual investment style for the two stage, then examine the conduct of their investment style, and analyze the performance of the fund under the different investment behavior.Based on the research of many scholars, the conclusions this paper obtained are in line with economic theory and present situation of china:(1) Actual investment style deviates from the nominal investment style seriously, Investment style rotation phenomenon exists on our country’s fund;(2) Convergence of equity open-fund investment styles is quite high, and the convergence of bull market is higher than shock market;(3) The performance of style drift funds significantly better than the funds that do not change style during the period, regardless of measured by style-adjusted performance or risk-adjusted performance;(4) that because of information imbalance derived from information issue, the managers can easily change fund style in order to achieve theirs company and personal profit maximization when they have performance pressure and so on.(5) For style convergence, I think the singleness of fund investors is the most important reason,others, such as the lack of investment tool and the short-terming of standard of performance also lead to the convergence of investment style.The innovation of this paper is mainly reflected in three aspects:(1) For the two stage, the first stage have the feature that it is a bull market with large-capitalization style, the second stage have the feature that it is a shaked market with middle-small capitalization style.(2) When analyze how investment style drift affect the performance of fund, I use two performance measured standards.(3) In the analysis of investment style drift, I implemant from two aspects, they are deviation of actual style from the declared style and the deviation of the second stage from the first stage.This paper examines the behavior of equity open-end fund investment styles,and get result that investment style drift will affect the performance of the fund, and explain investment style drift causes from four aspects However, the contribution of style drift on the performance of the fund and contribution of each factor on the investment style drift, the paper does not conduct in-depth discussion.So further research should commence from the following two aspects: First, investment style consistency indicators should be use to quantify the volatility of the investment style, then can more precise measure the volatility of the investment style on fund performance. Secondly, by quantifying each reason, then empirical test the reason that lead to change of the investment style.