| With the rapid development of China’s securities market and securities investment fund industry, fund performance evaluation is becoming an important subject of fund research, and fund performance persistence is an important part of fund performance evaluation. Fund performance persistence refers to that those which performed well in the past will keep their success in the next time, whereas those which had poor performances in the past will keep going worse. If fund performance does have persistence, fund investors should buy the funds which performed well in the past and sell the funds which had poor performances in the past. To the fund managements, the continuing researches about fund performance history well help them find problems in the investment and do some response in time. Fund performance persistence determines if it necessary to evaluate fund performance in some extent. Domestic and foreign researchers have different conclusions about fund performance persistence in the existing research. In the process of fund performance persistence research, there are some typical methods.This paper discusses fund performance persistence on the basis of the existing research. At first, it describes the historical process and present situation of China’s fund industry. Then it introduces some research methods of fund performance persistence. After that the paper does empirical research about fund performance persistence in the market volatility. The main methods are contingency table and cross-sectional regression. The selected samples are Open-end equity funds which set up before August2006. Sampling period is between August2006and July2009which the stock market had gone through a complete volatility cycle. It studies by contingency table firstly, sorting by excess return and risk-adjusted return and researching the rank change in different time. Then drawing a conclusion that whether the fund performance has persistence. In the contingency table according the funds’excess returns, fund performance did not have persistence in different period of market volatility, and even showed reversibility. In the contingency table according the risk-adjusted returns, fund performance did not have persistence when stock market went from up to down, but it showed persistence obviously when stock market went from down to up. Furthermore, the research result from transfer matrix and the whole persistence index in different times was consistent with the result from the method of contingency table. Fund performance persistence showed different results by using different performance evaluation indexes. It showed more persistence by using risk-adjusted returns. Then this paper analyzes funds’correlation between a month, three months, and six months through cross-sectional regression. It is believed that funds three months’absolute returns had persistence when stock market rose and plunged in single edge. But it showed negative correlation as the trend of stock market turned, that meant it showed reversibility. It is similar with the result from contingency table according the funds’excess returns. The cross-sectional regression of a month and six month is not significant, fund performance showed no regularity.At last, this paper analyzes influencing factors of fund performance persistence theoretically on the basis of empirical study. Then it makes some suggestions about how to promote fund performance persistence and form investment strategy. |
