Study On The Impact Of Style Drift On The Heavy Hold Stocks

Since the regulators put forward the idea that institutional investors should have a hypernormal development, the fund industry in our country developed rapidly. Because of its risk-sharing, benefit sharing features, mutual fund is welcomed by the majority of investors and has become the first choice when Chinese people make the investment. The vigorous development of the fund industry and the booming fund market promoted the innovation of the industry, the fund categories of our country developed from the original single equity Fund、bond fund、hybrid fund、 money market fund to the present system of fund categories which contained QDII、LOF and ETF funds. The innovation of the fund industry is not only reflected on the fund category, but also on the operation and management of the fund. Recently the idea of style investment become popular in the fund investment community, the concept of fund investment style has been accepted by the general fund market participants. However, several factors in the process of fund operation can lead to a change, so-called style drift, in the fund’s investment style, such as the replacement of the fund managers, the performance pressure of fund managers, and the herd behavior of investment. We all know that the mutual fund invest in stocks and bonds primarily, so the change of stock position is involved in the style drift of mutual fund inevitably. This paper investigates the impact of style drift on the heavy hold stocks.We pick the galaxy securities standard stock funds as the sample, set the fourth quarter of2012as the research period, identify the real investment style based on the Sharpe multi-factor model and use the SDS method to measure the drift degree of shifting funds. Then we analyze the relationship between the degree of style drift of fund and the volatility of heavy hold stocks statically by conducting the cross-section regression model. To analyze the impact of style drift on the heavy hold stocks dynamically, we build the drift funds index, and then conduct a vector autoregressive model. The conclusions are as follows:Firstly, there is a large-scale style drift in Chinese stock funds; Fund managers have the motivation to change the style investment strategy because of performance pressure. We built the Sharpe style model to analyze the sample funds and found that the style of53.5%funds varied in the complete study range. To be specific, the style drift rate of growth fund is42.25%, value fund is58.82%and the balance fund is as high as90.91%.Secondly, by conducting rolling tenses Sharpe factor model, we found that fund investment style is not stable. On this basis, we investigated the SDS score of funds which were not stable at a complete period and found the SDS scores were mostly in the range of (0.5,0.9), which means that the degree of fund style drift is large.Lastly, in the long term, there is no significant relationship between the fund style drift and volatility of heavy hold stocks. But in the short term, fund style drift will cause fluctuations of heavy hold stocks. But the impulse effect is short.