Theoretical And Empirical Study On Performance Attribution Of Equity Funds

With the economic and social development in our country, personal income has been continuously improving. People are no longer satisfied with the single financial pattern of bank saving, looking forward for a higher return one. Since the first Fund issued in 1998, Fund industry has got a rapid development in China. Securities investment funds have become one of the most important investment instruments for both institutional and individual investors. How to reasonably evaluate fund performance becomes the focus of fund management companies, fund appraisal agencies, investors and researchers. Performance attribution is one of the most effective methods to measure the effect of investment decisions and improve portfolio performance.It is one of the most important parts of fund performance evaluation system.Performance attribution method is essentially a method which compares the actual performance of the fund with that of a market benchmark, and breaks down the excess return into decision-making process corresponding effect to explain the source of the excess return.Today the most-used performance attribution methods in China is of external evaluation, which had developed before the 1980's abroad. Now the internal evaluation methods are popular internationally, but there are currently few domestic researches and practice in this respect. This paper presents the result of a study of various fund performance attribution analysis theories,models and researches, especially a detailed introduction on Brinson model,the typical representative of internal evaluation methods. Then there is a comparison between performance attribution external and internal evaluation methods. This paper conducted a multi-period performance attribution analysis based on performance data of equity open-ended funds from 2004 to 2015, using Brinson model. The result shows, selection ability is the main income source of equity open-ended funds. In addition, there is some relationship between the fund's performance and the stability of income source.