Open Equity Investment Fund In China: An Empirical Study Of Recessive Behavior

Since China’s first open-end fund Huaan Innovative launched in2001, it has been ten years’ history to build the decisive position of open-end funds in the fund industry and so is the development of empirical research system of open-end fund performance. The complete research system can be copied to other related research work on fund indicators. Kacperczyk, sialm, Zheng (2006) proposed return gap-the difference between net investor return and hypothetical holding return-to quantify fund’s unobserved actions during announcement intervals. Based on the fund performance research system and idea of return gap, we are trying to study on the unobserved actions of316open-end equity funds from2003to2011systematically.We find that, on average, return gap is above zero, and that is to say relative to the previously disclosed holdings, open-end fund managers have value adding abilities. Different from previous studies, we find unobserved action is not persistent, regardless of what period to be tested. On the one side, return gap has some predictive power for fund future performance so it could be used for making investment decisions for investors; and on the other hand, we analyzed the influencing factors of return gap on two kinds of fund characteristics, state indicator and strategy indicator, to help fund managers improve their unobserved value adding abilities. In the end, return gap is mostly explained by stock index return.