| Under the strategic guidance of financial supervision and regulation department to ultra-conventionally developing institutional investors, securities investment funds in our country has made dramatically rapid development in recent years, and has become the dominant force in securities market. However, problems had exposed during the rapid development of China's fund industry, such as the fund insider trading event, illegal operations and price manipulation event happened frequently, it's quite different from supevison department and people's original expectation. The market function of securities investment funds, and its investment behavior, operating mechanism, operating performance, supervision policies and other issues have become a hot topic in recent researches. However, there is no systematic or comprehensive study on both fund transaction behavior and the effects it has on stock price, and also a lack of methods on fund performance appraisal which is in accordance with the practical development of securities investment funds in China.Based on the inner relationship of trading behavior and operation performance of funds, this paper studies the transaction behavior and performance appraisal of securities investment funds on the basis behavioral finance theory. The paper consists of four main parts. The first part consists of Chapter 1 and 2 which gives an overview of theoretical models of investors'herd behavior and momentum reversal trading behavior in behavioral finance on the basis of the existing domestic and international literature reviews and comments, providing a theoretical foundation for the following empirical study. The second part consists of Chapter 3 and 4 which conducts an empirical study on fund herd behavior and momentum reversal trading behavior. The third part consists of Chapter 5 and 6 which applies the SBM three-stage model constructed in the paper in both the appraisal of overall performance of investment funds in China and the testing of fund managers'stock and timing selection ability. The last part is the Chapter 7 of this paper which summarizes the main conclusions of this paper and gives relative suggestions to the standardization of securities investment fund and the improvement of fund performance appraisal system. In order to make up for the inadequate innovation in empirical test methods which use for testing investor's herd behavior, the paper constructs a state space model that can be used for the testing of funds'herd behavior on the basis of CCK model which is used to test the herd behavior of the whole stock market, and conducts an empirical test by using the sample data of funds in China from the first quarter of 2004 to the first quarter of 2009, furthermor we examine the effect of herd behavior on funds'performance. The results indicate that the estimated coefficient between the return rate of funds and the stock market was time-varying, which means that herd behavior exists in the portfolio selection process of securities investment funds. However, the trend of quarterly-estimated amount of variables demonstrated that the degree of fund herd behavior gradually decreased over time, which means the increasing standardization of securities investment fund in China and rationality of fund managers'investment strategy. As the largest institutional investors in China's securities market, funds start to function in terms of stabilizing the market and promoting rational investments. The impact of fund herd behavior on its performance is not singnificant, but herd behavior can bring better performance while the market is increasing, and bring poor performance while the market is decreasing. In addition, the paper constructs an empirical model to test the rationality and irrationality of fund herd behavior on the basis of Sias (2004).In order to avoid the small sample deviation of the most frequently used momentum measure indicator (ITM) in the existing literature and the negligence of other factors which may affect the fund momentum trading behavior, a panel data model is constructed to test fund momentum trading behavior in this paper based on the variation of fund-holding proportion, the supernormal return rate of lagged stock price and the return rate of lagged stock market portfolio. The empirical study of the fund momentum reversal trading behavior indicate that funds in China showed momentum trading and appeared to be stronger in buying transactions while demonstrating reversal trading in selling transactions in general. The fund transaction behavior differed greatly with different investment styles. The growth funds, value funds and balanced funds appeared to be momentum trading whilst index funds showed reversal trading. Funds momentum trading behavior generally brought the continuing increase in stock price until the second quarter, which inferred that fund momentum trading behavior, to a large extent, was rational investment. Reversal trading strategies did not bring the rebounding of stock price and the stock price started to increase gradually until the next quarter, which meant that securities market in China lacked of response in the short-run. Fund momentum reversal trading strategy exerted greater influence on small market value stocks and in a large extent increased the risk of stock price fluctuation. The effect of funds'momentum reversal trading behavior on funs'return is not significantly, but since 1st quarter of 2008, take the reversal trading strategy on over-reacted stocks can gain more returns, and it can bring better performance for funds but also conducive to the market stability.Based on the method of controlling the external environment factors used in Fried (1999) efficiency appraisal model and the application of latest developed slack base efficiency measure model (SBM), the paper constructs a three-stage model of fund efficiency appraisal by taking into account both risk and operating environment factors, providing a new way for fund performance appraisal. Through the empirical research the paper finds that open-end fund efficiency in China generally witnessed a fluctuant upward trend. Before the third quarter of 2007, the fund maintained to demonstrate convergence during a downturn of funds efficiency. Then, the performance of fund industry in China continued to improve whilst the estimated standard deviation of funds performance was gradually decreasing, which showed the mutual development of quantity and quality of China's fund industry. The estimation results of random frontier regression model revealed that fund size, fund setup time, fund redemption rate and money supply growth played a positive role in augmenting fund efficiency. However, subscription rate of fund and return rate of Shanghai composite index which acts as a proxy variable of market conditions exerted mere influence on efficiency estimation of funds industry. Fund efficiency estimation maintained significant change after adjusting by environmental variables, revealing that the operating environment of funds had significant influence on its efficiency estimation.SBM three-stage model is used for fund's overall performance apprasial, however, fund's overall performance is consist of fund manager's securities analysis ability, asset classes selection ability, predictive ability of the market and other factors. Base on the consitute of fund's overall performance, decomposing fund manager's ability into stock selection ability and timing selection ability, this paper applies the T-M and H-M model to test fund managers'stock and timing selection ability using the data of China's funds. The study found that only a small part of closed-end funds in China showed significant stock selection ability whilst most of them had no market timing ability. About 75 per cent of the open-end funds showed certain stock timing ability and most funds could discover and hold under-valued stocks. Only less than 1/5 of open-end funds had market selection ability and open-end funds were absolutely weaker than closed-end funds in terms of timing selection ability. The performance of securities investment funds in China showed certain continuity in the short-run, whilst the fund performance relied on fund managers' stock timing selection ability in the long-run.
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