Empirical Research On Performance Attribution Of Securities Investment Fund In China

China’s securities market has continued to grow healthily andChina’s securities investment funds have likewise been growing brisklyin tandem with the securities market since1998. Securities investmentfunds have become one of the most important investment instruments forboth institutional and individual investors. It provides the investors with aconvenient and economical “collective investment scheme underprofessional investment management and operation”; furthermore, itgreatly contributes to China’s sustainable securities market and resilientfinancial system. Therefore, there is currently enormous interest in theresearches on the performances and impacts of China’s securitiesinvestment funds.In China there are currently few researches on the securitiesinvestment fund performance attribution analysis based on Brinson model.This paper presents the result of a study of various fund performance attribution analysis theories, models and researches. The primaryobjective of this paper is to present an approach of securities investmentfund performance attribution analysis based on Brinson model and Carinomodel. The purpose of this detailed empirical research of China’ssecurities investment funds is to enlarge the scope and extend the timeperiod of the previous researches.Eleven open-ended funds in China were sampled for the researchand their performance data in the time period from2008till2012wasanalyzed to evaluate the fund performance and the capabilities of the fundmanagers with regard to the asset allocation and the equity selection.Additionally, panel data analysis method was applied to investigate whatis the influence the market trends (bull market and bear market), the netasset valuation, the investment styles, and the CPI have on the fundmanagers’ asset allocation and equity selection. This research helps theinvestors to have insights into the funds’ performances. It also facilitatesthe appraisals of fund performances and fund managers. Furthermore, thefund performance influence analysis is beneficial to fund managers’self-improvements. It provides regulators basis for develop or improvethe regulatory rules.The empirical research concludes that most of the sampled fundsobtained excess return: asset allocation had negative return, which washowever compensated by the positive return of the equity selection. The fund managers had the capability of equity selection but theirdecision-making capability on asset allocation was limited by the fundcontracts, which is illustrated by the securities’ insignificant contributionto asset allocation. The bond contributed negatively to both the assetallocation and the equity selection, which indicates that the fundmanagers need to research more on it. The contribution of equityselection was offset by the pressure of the subscription payment, the lackof short selling mechanism, and the negative contribution of monetaryasset.In a bull security market, fund managers pay more attention to thestock asset allocation,and the equity selection’s contribution to theexcess return did not change obviously. In a bear market, fund managerspay attention to both the stock asset allocation and the equity selection,and the contribution of excess returns were improved. The larger the fundsize, the more obvious role in diversification of investments, and thesmaller the equity selection’s contribution to the excess return.There wasno clear correlation between either the investment styles or China’s CPIand the asset allocation or equity selection.