An Empirical Analysis On Performance Of Open-ended Equity Funds In China Through Four-factor Carhart Model

Since the21st century, the level and amount of our national economy are rising rapidly. As an important part of the financial securities market, fund market has achieved great development, all of its scale, product variety, fund quantity expands rapidly. And more and more get the acceptance of the broad masses of investors in constant self-improvement and perfection. According to Chinese securities investment fund industry association’s statistics, as of November29,2013, public funds get the total number of1505and the total net worth of2.916987trillion yuan. Open-end fund for1371, net value amount to2.693805trillion yuan. Equity open-end fund for604, net value amout to1.135261trillion yuan, the number and total net value of share to open-end fund is44.06%and44.06%respectively. As more and more market participants invest in equity open-end fund in our country, how to effectively evaluate its performance and establish its corresponding scientific system comes into a very urgent and realistic problem. It is very practically and theoretically significant for both investors, regulators and researchers.This essay chooses the four factors Carhart model to make an empirical research in performance of equity open-end fund in our country. It is established on the basis of Fama-French model by increasing momentum factor, effectively making up for the defects which the former models cannot explain. Four factors model comprehensively evaluates fund performance from four aspects of the market risk, size, value and momentum effects. It can be better than other existing empirical model because of a more comprehensive view of source to analyze the contribution of fund performance and the degree of the change. The four factors Carhart model can be a great tool to study in Chinese equity open-end fund performance by providing both strong empirical model and reliable theory basis.In the empirical process, this article selects the observation of39stock open-end funds which meet the requirements established before January1,2009as the research object. Through using relevant data to build model from multiple aspects such as the source of performance and contribution to the empirical research, we can not only analyze the role of each factor in the model to use, but also compare the relative to the three factor model that embodies the advantages of and improvement. It can be discovered by empirical process that equity open-end fund in China beat the market during the observation period. And the vast majority of individual fund performance is good, meaning that fund managers’investment behavior is effective. And four factors model can be good fitting to data of the fund market in China to obtain a better goodness of fit and statistic significance. The analysis results have higher consistency with the famous third-party morningstar fund rating, both in style, strategies, and star ratings, partly show that four factors model of securities market in our country has enough applicability. But even four factors model still has its limits, the impact factors on fund performance should be more than four. The real form needs to be further explored, and the performance of the model to improve the existing empirical model needs to be further researched.