The Impact Of Idiosyncratic Risk On The Open-ended Fund’s Performance Persistence

With the development of Chinese capital market, security investment funds,imparticular, open-ended funds are playing a more and more important role.Huaan chuangxin, the first open-ended fund came into existence in September2001,which changed the Phase that the fund breed was single in the security market of ourcountry. At the end of November2012, the number of open-end fund was1,125, thescale of a few trillion, which has a pivotal role in the development of Chinas capitalmarket. At present, the domestic and foreign scholars also put more and moreattention to the study of the performance of the Fund, and the study of Fundperformance persistence has important practical significance.Fundperformancepersistence means that the early performance of the securities investment fund bothgood and bad have the continuation of the trend. And the fund which had goodperformance may be also good in the future,early poor performance is also poor inthe future，which is often said that "the strong continuetobe strong and the weakcontinue to be weak ". The research of Fund performance persistence has attracted alot of scholars into this area. It is a very important research topic in the study ofcontemporary finance theory. The research on persistence in fund performance cannot only get more useful information in order to help investors, but also provideefficiency reference for the fund management company to judge the operatingabilities of the managers and also has important implications for the development ofChinas fund market.Basing on the previous studies and Chinese security investment funds practice,this paper evaluates performance of our open-ended fund performance in theshort-and long-term results of persistent. And from idiosyncratic risk perspective tostudy the impact of the open-end fund performance persistence, existing studieshave shown that idiosyncratic risk in actual investment had not completely beendispersed, and priced.In the other words the funds high-yield may bear a higheridiosyncratic risk. This paper attempts to use the methods of theoretical andempirical analysis to investigate the impact of the idiosyncratic risk on the fund performance persistence. And obtained the following conclusions: Chinas open-endfund performance in three months, six months term has some persistence and noapparent persistence in the one-year.Chinas open-end fund’s idiosyncratic risk is notcompletely dispersed; idiosyncratic risk of the open-end fund portfolio and fundportfolio excess return exists a U-shaped relationship, and higher idiosyncratic riskdoes not necessarily bring high-yield, even larger negative returns; fund portfoliowith higher idiosyncratic risk results greater transition probabilities in one-year andtwo-year term and makes judgment fund performance more elusive.