The Study Of Volatility Anomaly In China's Mutual Fund Market

In the stock market,scholars have found the anomaly of volatility,that is,the higher the volatility of the stock,the lower the expected return.This is contrary to the conclusion of Capital Asset Pricing Model(CAPM)and Arbitrage Pricing Theory(APT),that high risk corresponds to high return.So whether the anomaly of volatility exist in fund market has become a problem that is worth discussing.It also provides practical significance for investors' investment and regulatory authorities to carry out policy guidance.If the volatility anomaly does exist in Chinese mutual fund market,it is necessary to know whether the excess returns of low-volatility funds are the show of fund managers' stock selection ability or the origin of undiscovered pricing factors,so as to give fair and reasonable evaluation to fund managers.Based on the above analysis,this paper uses the fund data from January 1,2009 to December 28,2018 to test the existence and robustness of volatility anomalies in China's mutual fund market,and to discuss whether the existence of volatility anomalies stems from the stock selection ability of fund managers.Firstly,this paper calculates the return rate of the fund by using the daily net value data of the fund,and takes the standard deviation of the daily return rate of the fund for T-1 year as the proxy variable of the volatility,divides the open-end fund market of our country into five groups,and calculates the equal average return rate of each group every month in t year.Then,the monthly equal weight average return and Fama-French five-factor model are used for regression analysis to prove the existence of volatility anomalies in the fund market.Secondly,in order to prove the robustness of the conclusion,this paper uses the bivariate grouping method to control the characteristic variables of the fund;divides the bull-bear market and the sub-fund to carry out robustness analysis;changes the calculation period and the portfolio holding period of the fund volatility,under three circumstances,the volatility anomalies of the fund market exist,which proves the robustness of the results.Finally,this paper uses Fama-Macbeth regression to find the quantitative relationship between fund volatility and return after controlling other characteristics of the fund.Next,the purpose of this paper is to prove whether the difference between low-volatility portfolio and high-volatility portfolio reflects the ability of fund managers to choose stocks,or is caused by other undetected factors.Firstly,referring to the research of Carhart(1997)and Jordan(2015),this paper constructs the volatility anomaly factor(LVH),and brings it into the Fama-French five-factor model,and finds that the volatility anomaly disappears.Considering that the construction of volatility anomaly factor(LVH)may lead to the "home game" problem,this paper also refers to the relationship between turnover rate and characteristic volatility and constructs the turnover anomaly factor(AVQ)and brings it into the Fama-French five-factor model,and finds volatility anomaly disappear which proves that the excess returns of low volatility por tfolios are not derived from the ability of fund managers to choose stocks,but from the undetected pricing factors.The significance of this paper is as follows:Firstly,the attraction of the fund in China market is increasing,and the concept of "selecting stocks is not as good as selecting mangers" is deepening gradually.The research on the volatility anomaly of the fund will provide investment reference for the fund investors;secondly,for the study of stock market anomalies,although the constructed arbitrage portfolio can theoretically obtain excess returns,it is uncertain whether the constructed arbitrage portfolio can be successfully constructed due to the limitations of the actual micro-market conditions.Even if the constructed portfolio is successful,whether the constructed arbitrage portfolio can achieve excess returns is still unknown,but the fund is a real portfolio,considering various restrictions and various items.Expenses and returns are actually available to investors,so it is more valuable to study the fund market;thirdly,if the volatility anomaly leads to the difference of fund performance,the construction of volatility anomaly factor and turnover anomaly factor can scientifically and comprehensively evaluate the operation of securities investment funds,which is of great significance to investors' investment decisions.