Empirical Research On Performance Persistence Of China’s Bond Mutual Fund

Recently, the bond mutual fund as a important branch of securities investmentfunds develop rapidly in China. The number of the bond mutual fund increase quicklyfrom25in the end of2007to77in June2009；assets’ scale of the bond mutual fundincreases from67.1billion yuan to114.4billion yuan, accounting for4.96percentof the Fund’s total assets. There is a gap between the proportion of China’s bondmutual fund and proportion of America’s. With Chinese investors is becoming moreand more rational, there is great room to grow for the bond mutual fund. Wheninvestors are choosing bond mutual funds, how to look at their rankings? Do bondmutual funds demonstrate the stability of performance because of its low risk and lowearnings? This need to conduct a research on the performance persistence of thebond mutual fund. Through this research, it may provide the reference for investors’decision-making, be helpful in the reasonable evaluation of fund manager’s talent ofinvestment and provide a good platform for future related research.By using some kinds of method based on the domestic bond mutual fundcharacteristics, this paper study on the performance persistence of14bond mutualfunds from different angles which are found earliest in the period from July2005toJune2009.The performance of bond mutual funds is measured by no-risk adjustedreturn, Sharp ratio and Jensen index. In empirical research, firstly this paper examinesthe relative persistence of the whole bond mutual fund performance by contingencytable and Spearman rank correlation coefficient test. Secondly, this paper examinesthe absolute persistence of the whole bond mutual fund performance bycross-sectional regression. Finally, this paper examines the relative and absolutepersistence of a single fund performance respectively by adjacent rank difference testand auto-regression.Empirical tests have shown that using original return as performance index, thebond mutual funds exhibit relative and absolute persistence of performance in fourinspecting periods (1month,3months,6months,12months), and a significantreverse in the inspecting period of12months. Using risk adjusted return asperformance index, the bond mutual fund doesn’t have the performance persistence totality in the four inspecting periods. Besides, compared to bond market the bondmutual fund is more sensitive to stock market in China. With the performancepersistence test of a single fund, we found that a part of bond mutual funds haveperformance persistence, and the results broadly in line with the overall testing.