The Analysis Of Chinese Open-end Funds With Security Selection,Market Timing And Volatility Timing

In March 1998,China had the first public fund,the fund,Kaiyuan.In 2018,it is the 20th anniversary of the establishment of public funds.Over the past 20 years,China's fund industry has developed faster and faster,and investment funds have been favored by more and more investors as one of the ways of asset allocation.In the public fund market,the open-end fund market is the largest,and information disclosure is more comprehensive.These 20 years of development have also exposed many problems in the fund market.The management capabilities of fund managers are mixed and often noticed as investors' concerns.For investors,judging whether a fund has a good performance is critical to their investment.At present,there are many performance evaluation methods of the fund.The earliest method of fund performance evaluation is to propose indicators for measuring fund returns and risks,such as unit net assets and standard deviation.Later,in order to seek the results of more accurate fund performance evaluation,scholars combined the benefits and risks,evaluated the performance of funds with different risk levels,and developed a performance evaluation method for risk-adjusted returns.Other scholars pay attention to the sustainability of fund performance,and put forward the evaluation method of fund performance sustainability.This paper discusses the ability of fund managers to manage funds.Based on the analysis of domestic and foreign literatures,this paper uses the fund performance evaluation model that introduces risk adjustment factors to analyze whether fund managers have security selection,market timing ability and volatility timing ability.The domestic and foreign research before Ferson and Mo(2016)did not include the three performance components of security selection,market timing ability and volatility timing ability into the same performance evaluation framework.This paper uses Ferson and Mo(2016)performance evaluation method to test its applicability in the domestic open-end fund market.The fund sample studied in this paper is all open-end funds in China from 2008 to 2017(excluding index funds,bond funds,money market funds,QDII funds and alternative investment funds).After the empirical analysis,we have the following four findings:(1)According to the security selection of open-end funds,the funds are sorted into groups,and equal weight portfolios and market-valued portfolios are constructed.It is found that the difference between the alpha high and low quintiles of the two portfolios using Carhart(1997)four-factor model is 0.09%and 0.02%,t values of 2.74 and 5.30,were significantly positive,demonstrating that Ferson and Mo(2016)performance evaluation methods are applicable in the Chinese open-end fund market.The five sets of four-factor alpha estimates for both portfolios are negative,indicating that the performance of the two portfolios is not better than the expected market return.We did not find that the fund sample has positive stock picking ability during 2015-2017.(2)The decomposition of the total performance of open-end funds found that 42 basis points of 0.44%of total performance ap were attributed to volatility timing ability,12 basis points were attributed to market timing ability,and both had positive effects on total performance ?p.However,there are 10 basis points attributed to the security selection,which has a negative effect on the total performance ?p.We find that the volatility timing ability is dominant,the market timing ability is weak,and security selection has no positive effect on total performance ?p.The fund's volatility timing ability accounts for the largest proportion of total performance ?p.This research may stimulate more attention to the fund's timing behavior in future research,especially the volatility timing behavior.(3)Since we find that volatility timing ability occupies an important position as a component of total performance,we continue to explore volatility-related behavior.Empirical evidence has found that funds with a lagging response to volatility tend to increase risk exposure when volatility is high in the near term.When recent volatility is low,funds that lag behind volatility tend to reduce risk exposure.(4)A regression analysis of open-end fund performance and market sentiment indicators found.When the market sentiment level is high,the market timing ability,volatility timing ability,stock picking ability and total performance are significantly reduced.Among them,the impact on market timing ability is the strongest,the volatility time selection ability is second,and security selection is the weakest.Therefore,the relationship between total performance and investor sentiment indicators is mainly driven by the ability of market factors to choose timing.Based on all the empirical analysis,we conclude that the performance evaluation method proposed by Ferson and Mo(2016)is applicable to the domestic open-end fund market,and we find that open-end funds have volatility timing ability and market timing ability.However,it has not been found that the fund sample during the 2015-2017 study period has a positive security selection,but the stock picking ability has a negative effect on the overall performance.On the basis of the conclusion,we put forward suggestions for establishing a scientific and comprehensive performance evaluation system,strengthening the supervision of fund companies,increasing the transparency of fund position disclosure,and improving the fund management system.