Study On Investment Style Drift Risk Of Chinese Stock-Based Open-End Funds

After the1980s, securities investment funds industry has been fast development, the open-end fund is entered the explosive era of rapid development. Capital markets mature development and also promoted the prosperity of funds, as the voluminous issuance of fund products, especially increases in size of open-end stock fund, the space for fund industry’s innovative development being opened already. In the end of2012, our company has established80fund companie, to July10,2013, there are542stock funds,257hybrid funds, bond586, LOF95, ETF74, QDII89. Indeed, the open-end funds now already become important institutional investors in China’s capital market, at the same time, as an important tool, they also play a critical role in promoting the stability and health development of capital market in China.At present, there are two methods recognized by the international researchers: based on a combination of research methods and research methods based on income. The former needs to get all of the shares held by the situation, so there is the timeliness of data and the cost of collection and other issues. The latter is the most widely used method because of its ease application. This study aims to explore the Fund’s investment style to identify and measure the style drift risk, through comparative analysis to find the best screening style model, and then econometric models for fund style drift empirical research. This paper will analysis the nominal style and the actual style of funds, then to find the reasons of why they are different. Also it will further explore the style drift risks and their impact on fund performance, in the end, the study will give some recommendations.This paper is divided into six chapters:Chapter1is the introduction part, it describes the background, significance, investment style drift literature review, structural framework papers and research methods of the research.Chapter2is the theories. This chapter first gives a definition of fund investment styles, explains what style drift is, drift risk, and classifies the investment style. Furthermore this chapter describes and analyzes the investment style drift formation. Chapter3is the development fund investment style research. First it introduces the history of the development of the fund industry and analysis the development of an open-end fund followed by the two countries for the development of fund style was compared. Chapter4is the methods of the Fund’s investment style screening. It gives a details description of the two methods: based on a combination of research methods and research methods based on income, through comparation,, selected the best recognition model used in this paper. Chapter5is the focus of this article. It will analysis the funds style by using the model selected in Chapter4and finds some funds occurres style drift. By analyzing the empirical results, style drift infer the possible causes, and further measure of style drift risk, analyze its impact on fund performance. Chapter6is the conclusion and policy recommendations based on results.There are three possible innovation in this paper:the first is from the perspective aspect of the study, due to the open-ended investment funds into the country late, coupled with the investment philosophy of the immature market investors, domestic fund investment style little attention in this regard involved professional research is less; the second is the explanatory variable in order to overcome their multicollinearity problems in the research methods, the use of transverse differential treatment, try to eliminate the effects of multicollinearity brought; contents of the third study, the analysis of the nominal actual investment style based on different investment styles, measure the risk of fund style drift further analyze its performance fund style drift effects.