Research On Performance Persistence Of China's Bond Funds

In recent decades,with the rapid growth of China's economy,great developments have taken place in mutual fund industry of China's capital market.Much of our daily investments are made by professional fund managers,rather than retail investors.That makes evaluating the value offered by professional fund managers an important issue for retail investors.As an important part of the mutual fund market,performance of bond funds is related to investors closely.By the end of December 2019,there were 143 mutual fund management companies in China,with a total of 14.77 trillion yuan assets under management.The asset scale of bond funds has reached 276.608 billion yuan,which is close to the sum of equity funds and mixed funds.The performance of bond funds has not only drawn the attention of retail investors but also become the vital issues of many scholars and experts.Investors and mutual fund management companies concern about both the amount of returns of funds and whether these returns are sustainable,which as known as the questions of performance persistence.Therefore,the research of performance persistence in mutual funds has become an important research topic of significant practical value whether for the academic communities or the industries,Based on other scholars' research literatures of bond funds' performance as well as bond funds' performance persistence,we use both a single-factor model and a multifactor model,which is extended by the single-factor model,to evaluate the performance of China's bond funds,the multi-factor model contains risk characters of bond market which include term risk and credit risk.We also consider bond funds' invest constraint an important factor which affect bond funds' performance,so we introduce the benchmark of bond fund into our multi-factor model to control the return of bond funds.Finally,we used a variety of methods to test the performance persistence of China's bond funds,including the contingency table test,Spearman rank correlation test and the recursive portfolio formation test based on the multi-factor model.The empirical results show that no matter under the traditional single-factor model or the multi-factor model,China's bond funds have failed to achieve significant excess returns,and among those risk factors which may affect bond fund returns,credit risk has a more significant impact than term risk.In the empirical research on performance persistence,we find that bond funds with good past performance tend to maintain better performance in the following period,which means there are significant evidences of performance persistence in China's bond funds.At the same time,in the short term there is a certain reversal effect in China's bond funds,but this effect are going to reduce gradually with the extension of holding period.