A Study On Performance Evaluation Of Chinese Open-end Funds

Performance measurement is a crucial part of mutual fund management. As open-end funds in China develop very rapidly and Chinese fund industry becomes more involved in the world, the proportion of open-end funds is become larger in Chinese fund industry. Consequently, the evaluation of the performance of open-end funds becomes a focus.Firstly, this paper reviews and summarizes the theories and methods in fund performance measurement. Then it provides a comprehensive study of the performance of 36 open-end funds in China during 2004-2005 with empirical method. The study examines the risk and income level, risk adjusted performance, stock selectivity and market selectivity, performance persistency and the characteristic factor of open-end funds in China. The empirical research shows that most open-end funds have better performance with lower risk level than the market. About half of the open-end funds have showed excellent stock selectivity but most of them have no evident market selectivity. As for short-term performance persistency, the raw performance shows no persistency while the risk adjusted performance shows some persistency. The characteristic factors have some influence on the performance of open-end funds. In bear market, the turnover and the scale are the most important factors in the performance of the open-funds. Finally, based on the empirical research, this paper provides some constructive advice to the administration authorities, fund management companies and fund investors.