Performance Evaluation Of Chinese Open-ended Equity Funds

We examine a sample of 440 Chinese open-ended equity funds,which survive more than one year from January 1,2004 to December 31,2015 under the bull market and bear market conditions.We investigate questions:the factors that have influence on fund performance,the consistency of fund performance,and the fund redemption,and whether fund managers have stock selection and market timing abilities.We first review the recent literature to extract the factors that could influence fund performance,and then divide those factors into three categories:fund characteristics,fund company characteristics,and fund manager characteristics.Specifically,we first employ the Carhart(1997)four-factor model to estimate whether fund performance surpasses the average level of the market,and then use a CrossReg approach to evaluate the effects of the above factors on fund performance.We also conduct a comprehensive robustness check using five different standard errors,and compare the regression results between different market conditions and between different types of funds.To examine whether fund managers have stock selection and market timing abilities,we use the T-M model and C-L model,and find that the overall performance of the Chinese open-ended equity funds does not surpass average market performance.Both the security selection and market timing ability of fund managers appear to be inadequate.Stock funds in bull markets,however,outperform the market,but such performance largely depends on rising stock prices in the benchmark portfolio.To examine whether fund performance is consistent and what factors affect the consistency of fund performance,we use the momentum strategy and cross-section regression method to test fund performance in three time horizons:three months,six months and twelve months.The results suggest that all of them,stock funds,mixed funds,or overall funds have significantly consistent performance within three or six months.However,such consistent performance does not exist beyond one year.This supports the conclusions about the momentum effect in the Carhart four-factor model,To examine whether the redemption anomaly exists in the Chinese mutual fund market and what factors affect fund redemption,we use the Granger Causality Test in panel data,and find that it does not exist in the Chinese mutual fund market any longer.Our results indicate that apart from the factors that have been widely studied,such as the scale,age,and management fee of a fund,there are other factors that affect fund redemption significantly,such as working experience and the switch frequency of fund managers as well as the number of open-ended funds managed by a company.Finally,according to our findings,we propose some suggestions to the fund investors,fund managers and related regulators and discuss the main innovations,shortcomings and future works to this paper.