The Empirical Research On Volatility Timing Ability Of The Open-end Equity Fund In China

With the rapid development of China's fund industry and the increasing number of funds, Securities investment funds in the financial markets have been of great influence, and become the favorite investment instrument of the individual investors and institutional investors.With the characters of trading flexibility and the transparency of information enclosing, the size and number of the open-end funds are much more than the close-end funds. And the open-end funds have been the mainstream products in the market. How to evaluate the fund's performance scientifically and reasonably has been the main concern of the investors. And it is of important practical significance.As a index to test the invest ability of the fund managers, timing ability is the important aspect of the fund's performance evaluation. Timing ability can be divided into two parts further, which are return timing ability and volatility timing ability. Volatility timing ability means that the fund manager predicts the market fluctuations, and adjusts the level of risk of the portfolio according to the predict to improve the effectiveness fund investments, which means if the fund manager has the volatility timing ability,he will change the fund's investment portfolio in order to avoid systemic risk.In this paper, we study the volatility timing ability of the fund managers by constructing FF3-TM-B and FF3-HM-B model, choosing the open-equity funds which found before 2007 as a sample, January 4, 2007 to May 31,2010 as the sample interval, and use the Busse volatility timing model. And we consider the income factor in this model in order to separate the influence of the income timing ability and explore the volatility timing of the open-equity fund manager. The empirical results show that the majority of the volatility timing coefficient in the sample is negative, at the 1% significant level of confidence, which shows that China's open-equity funds have significant volatility timing abilities. But the volatility timing coefficient is small, indicating that volatility timing is weak. However, this only means that the fund managers have the volatility timing abilities, whether the market timing ability can contribute to the fund performance needs further study.So we make further test on the relationship between the timing coefficient and the fund performance. The test results show that there isn't a significant negative correlation between the timing abilities and the fund performance, which means the managers'volatility timing abilities, can not make significant contribution to the fund performance. In addition,this article study the number of the fund manager and other aspects which may affect the volatility ability. The result indicates that several other factors on the volatility timing ability were not significant.