The Research And Selection Of Excellent Mutual Funds

There are currently more than69mutual fund companies in China. Moreover,thenumber is still growing rapidly due to another surge of fund issuance and fundcompany establishment recently. The severe competition of ranking among mutualfunds at the end of every year attracts attention from many participants in the market.However, based upon close observation on the overall performance of the mutualfunds, we can hardly find consistent winners in the mutual fund market. Many mutualfunds underperformed their benchmark in the long run, which casts doubt on whetherthose highly-paid fund managers create value for their investors in the long run? Idecided to explore the commonalities of thefunds with stellar performance,examining which factors relate to their performance. Firstly, I summarized the currentpopular ranking systems in the market. Then, based on their advantages anddisadvantages I established my own evaluation system that primarily considers thedownward risk. Using both Morningstar ranking system and my own perfrmancemeasure system, via two multi-factor linear regression model, I found that theexperience of fund manager and annual net capital flow are significantly related tothe excellent performance of mutual funds, which is consistent with perception andjudgment of the fund market.