The Performance Evaluation Of Open-end Funds Based On RAROC

With the rapid development of open-end funds in recent years, the types of open-endfunds and fund companies are gradually increasing, and also the performance for open-endfunds has become more deeply and widely. In China, the academic progress of open-end fundmainly referring to foreign models and quantitative methods to analyze, however there is notmuch empirical research for whether they are suitable for local market, and the applicableconditions of the various indicators and the corresponding verification are also lacked.This paper selects twenty open-end Funds for study, and considering the universality,here the article chooses ten equity funds, five bond funds and five hybrid funds. And theperformance situations of the funds after the risk-adjusted in2010to2012, which are found atleast three years, are investigated. This article uses historical simulation method to measureand rank these funds’ VAR, and gets RAROC of the various funds through the VAR andRAROC models. Furthermore, RAROC indicators are analyzed with the classic risk-adjustedindicators. And then using the Spearman rank correlation analysis, the relationship betweenRAROC indicators and the other indicators is investigated. In addition, using linear regression,this article estimates time series of the funds’ weekly cumulative net income rate with CAPMmodel, and then standard deviation and β value of the various funds are gotten. Finally, threerisk indicators of open-end funds, which are β, standard deviation and VAR, are analyzed. Atlast, for open-end funds using RAROC model in China, the article gives suggestions fromdata processing to model using, and then the investors are provided with reference in theanalysis of fund performance. And the investors’ choice problems in these twenty funds areanalyzed.The empirical result shows that open-end funds’ performance in past two years is reallypoor, and by contrast, bond fund performs better than equity fund and hybrid fund. BetweenRAROC and traditional indicators there showing a high correlation, the main difference is thediversity between risk measure indicator VAR and standard deviation, β value. Throughverifying RAROC, this article solves the situation that the traditional indicators performanceis overvalued, which has some advantages. When the revenue gap is little, the investorsshould focus on the influence of the risk of fund performance when making a choice, learnhow to differentiate income-oriented fund and risk-oriented fund, and make a decisionaccording to their own risk aversion. On the application of RAROC model, VARmeasurement is crucial, and how to forecast VAR more accurately is also the difficulty of model using.