Study On Performance Comprehensive Evaluation Of Stock-based Open-end Funds

With the further development of China's capital market, securities investment funds are growing steadily. By the end of 2009 the total number of securities investment funds in China had reached 621 with the total net assets being 2.67608 trillion Yuan and total shares of 2.453507 trillion. Those who possess securities investment funds have become important institutional investors of capital market, which also functions as an important tool to promote market stability and its healthy development. Accordingly, the numbers of investors of securities funds whose investment strategies are largely based on funds evaluation have witnessed a rapid growth. Therefore, it is of great theoretical and practical significance to give an integrated, comprehensive, systematic evaluation on securities investment funds in China based on multi-dimensional perspectives and by using multiple indicators.A comprehensive evaluation on China's stock-based open-end funds is made in the present paper on the basis of the following four demotions:funds performance, investment capacity, investment behavior and sentimental characteristics, and by using multiple indicators and method of principal component analysis. In addition to the indicator information of funds performance and investment capacity, this study also considers the efforts of funds managers which are made to fulfill their duties, that is, even if a fund does not perform well, funds manager's due diligence and hard work should also be recognized by the public. Market sentimental factor reflects the "mood" of the market performance. And different financial assets have different sentiment characteristics. Commonly used indicators for evaluation have not considered or not fully considered the impact of sentiment characteristics on funds performance measurement. Therefore, adverse effects of funds sentiments should be ignored when evaluating funds. In conclusion, comprehensive evaluation system on funds should be based on the four dimensions mentioned above, and public information is better to be employed on the in-depth, comprehensive and accurate evaluation on funds.This article contains three sections with Chapter 1 and Chapter 2 being the first section. This section mainly introduced background knowledge, purpose, writing significance, framework, and methodology of this paper. Meanwhile, related literature of evaluation on funds and analysis methods are summarized, which lays solid foundation for following researches on this subject.The second section of this present paper consists of Chapter 3 and Chapter 4, this section measured funds performance, investment ability, investment behavior and influence of sentiments characteristics on China's stock-based open-end funds by using the empirical data of China's stock-based open-funds and all A stocks on Shanghai and Shenzhen Stocks Exchange. This section includes mainly four studies. Firstly, based on the following six commonly used performance indicators including average excess earnings, Sharpe ratio, Treynor index, Jensen a, Fama-French a and Carhartα, and the following three linear factor pricing model: single factor model, Fama-French three factor model and Carhart four factor model, the performance of open-end funds are measured precisely and comprehensively, and the sequence uniform of indicators are also analyzed. Secondly, on the basis of TM model, HM model and CL model, this paper tried to quantize open-end funds investment ability in China, analyzed the influence of securities selection ability and market opportunity selection ability to the funds performance, and inspected the sequence uniform of ability indicators. Thirdly, due to the deficiencies of non-intercept linear factor pricing model, using HM model and TM model and activeα-activeβ, this paper respectively measured open-end funds'managers'securities selection behavior and the market opportunity selection behavior, quantized the funds'managers'efforts in the aspects of selection of securities and market opportunity, studied the relations between investment behavior and investment ability, and analyzed influence of investment behavior to funds performance. Fourthly, the following four sentimental factors which includes market excess earnings factor, scale factor, value factor and momentum factor in Carhart four factor model, this paper modified the commonly used funds performance indicators according to the funds sentiments, eliminated adverse influences of market sentimental characteristics to funds evaluation.The third section is constituted with Chapter 6 and Chapter 7. In Chapter 6, based on the 27 indicator of the four dimensions:funds performance, investment ability, investment behavior and sentimental characteristics and by using the method of principal components analysis, quality synthetic evaluation on open-end funds is made through investigating the relationship between indicators of comprehensive evaluation and investment behavior and effects of market sentimental characteristics. Chapter 6 highlights the significance of managers' efforts and effects of sentimental characteristics on the quality synthetic evaluation. Chapter 7 carries on the summary to the present paper, in which deficiencies of this paper and future research in this area is pointed out.The contribution and innovation of this paper lies mainly in the following four aspects. Firstly, after a systematic summarization on related literature and methodology, this paper thoroughly analyzed the performance of China's open-end funds and the managers'investment behavior based on the theories of the single factor model, the Fama-French three factor model, the Carhart four factor model, the HM model and the TM model. Secondly, based on the deficiencies of the non-intercept linear factor pricing model, and theories of the HM model and TM model, open-funds'managers'investment behavior or efforts are evaluated by using the method of activeα-activeβ. Thirdly, on the basis of PS method, this paper modified the commonly-used indicators of performance by referring to the sentimental factors and knowledge of characteristics of funds sentimentβin Carhart four factor model, and investigated the effects of market sentiments on the measurements of funds performance. Fourthly, based on the principal components analysis method, the quality synthetic evaluation on China's open-end funds is made in terms of 27 indicators of the four dimensions:funds performance, investment ability, investment behavior and sentimental characteristics.