The Evaluation Performance Of China’s Open-end Fund Based On Liquidity Risk Adjustment

American subprime crisis began originally in August,2007. In thefinancial crisis, liquidity risk plays an important role and becomes one of theimportant force in triggering and spreading the crisis. Open-end fund which isvery active in recent years have also been affected? When it comes to thereturns of investment risk, investors ofcus more and more attention on theliquidity risk.Traditional fund performance evaluation index Sharpe and Treynor usestandard deviation，Beta coeiffcient as a means of risk description respectivelyto judge fund performance. They is based on Markowitz’ theory of assetportfolio and capital asset pricing model, the theories require too manyassumptions，especially in the eiffcient market hypothesis and the normaldistribution assumption of yield. However, those are not the case and theresult based on that becomes ineffective. Moreover，the standard deviation andBeta are global risk，but what investors really care is below riskValue at risk，as a kind of absolute risk measure, is different from relativerisk and yield distribution is not strictly required, so VaR has been widely usedin modern risk management. In this paper, liquidity risk is considered intoCAViaR model in terms of the shortcomings of the traditional fund ratingindex, and then use VaR as a Risk factor into Risk Adjusted Return on Capital(RAROC, Risk-Adjusted Return of Capital) as the fund performanceevaluation index. Finally, compare the RAROC with traditional fundperformance evaluation indicators by the Kendall correlation analysis, it is concluded that RAROC has the highest correlation and VaR, it can betterreflect the potential risks of fund, and the correlation between RAROC andother traditional indicators is the lowest, so RAROC is not the simpledeformation of traditional indicators.