Analysis On Decision-making Ability And Investment Style Of Mutual Funds

As we all know,Stock market in China is highly volatile,with sharp rises and falls occurring from time to time.Many investors usually describe the situation as "short bull and long bear",and it is a great challenging for individual investors to make profits in this investment environment.According to the statistics of the market value of A-share holdings by relevant institutions,the shareholding ratio of individual investors in China’s stock market is still high,which is completely different from the structure of developed countries or regions where professional institutional investors dominate.From the perspective of the development of investor structure,China is likely to move towards an investor structure dominated by institutional investors,and the assets managed by institutional investors,represented by mutual funds will still be further enhanced.What is the performance of China’s mutual funds and how do we evaluate their investment decision-making ability? In this regard,many researches have conducted many studies and achieved a large number of research results.However,after reading and sorting out the relevant literature,it is noticed that there were also shortcomings in the previous research,which can be summarized into following situations.First is the lack of representativeness of research subjects;the second is that many researchers ignore the situation where the performance benchmark α is not zero when measuring fund performance;Third,there is insufficient of research on the relationship between fund investment style switching and fund performance,all these may result in overestimation or underestimation of fund performance.Based on these conditions,sample funds are carefully selected considers various factors including fund type,stock market cycle,fund size and so on in this thesis.In terms of research methods,an optimized H-M Carhart four-factor model is used to measure fund decision-making ability,to exclude the possible bias caused by the non-zero alpha of the performance benchmark.The results of this thesis show that the sample funds basically do not have the market timing capacity and very weak stock selection capacity regardless of the bullish or bearish.By comparing the fund performance in the same period,it is found that the median increase rate is higher than the average,combined with the rise and fall of the net value of the and the benchmark rise and fall,the average increase rate of the fund is higher than the benchmark when the market rises,and the average decline rate of the fund is lower than the benchmark when the market falls.Therefore,it can be seen that ordinary investors can hold the public offering fund as an investment variety for a long time.By analyzing the fund investment styles and the changes in different cycles of bullish and bearish,the results show that when the market is bullish,the performance of funds with frequent changes in investment styles is better than that of funds holds the same style,while when the market is bearish,the situation is just opposite.By comparing the market timing capacity of funds with different investment styles,it is found that the timing ability of small-cap style funds is better than large-cap funds.Since most funds do not have the market timing capacity,it is not the best choice for fund manager to frequently change their investment styles and chase market hotspots.Mutual fund management teams need to put a lot of effort into in-depth analysis of investment industries and objects,digging out undervalued stocks in the market and building a long-term portfolio so as to achieve continuous improvement of the net asset value of fund.