Study On The Performance Of The Open-end Funds In China

As the rapid development of Chinese capital market, open-end funds havebecome the important proportion in the securities market. Impersonally，justly andtruly measuring their performance can help an investor realize risk and income of afund,then carry out rational decision. It is not only an outside constraint force to fundmanager which improve level of management, but a reference for monitoring tosupervisor which promote development of fund market.thus, making a scientific andreasonable evaluation indicator is meaningful to the development of fund market.Firstly,this article theoretically analysis three traditional evaluationindicators(Sharpe ratio, Treynor ratio, Jensen alpha) which are used to evaluate theperformance of the funds.The three traditional evaluation indicators which havebeen founding based on Capital Asset Pricing Model have strict assumptions,especially the yields follow normal distribution assumptions that usuallyunconformity the practice. These three indicators use Standard Deviation and BetaCoefficient that can separately evaluate total risk and systematic risk as riskmeasures. However, downside risk is more concerned by investor.Secondly, the article expound the fundamental,computing method and testingmethod of Value at Risk(VaR).Connecting with the spikes and fat-tail characteristicsand volatility clustering of data, we improve VaR model and discuss GARCH-VaRmethod.Basing on the analysis of GARCH, the combination of GARCH with t orGED distributions, may characterize the characteristics of the base.Hence,it is verymeaningful to use VaR as the method of measuring risk and introduce VaR toimprove Risk Adjusted Return On Capital(RAROC).This paper selects15stocks open-funds as the sample. The empirical analysisshow the spikes and fat-tail characteristics and ARCH test show volatility clusteringof data. Thus, it is necessary to use GARCH-t and GARCH-GED method to capturethe these characteristic. Computing VaR calculation by the above line of analysis and making Kupiec’s performance test.By comparing the VaR calculation on normaldistribution, t distribution and GED distribution, it shows that the model underGARCH-GED at confidence level of95%is the best in reflecting the risk of thefunds. Finally, after the comparison and Spearman correlation analysis betweenRAROC and three traditional evaluation indicators, this paper obtained that RAROCadjusting by VaR is better to reflect the potential risks within the fund performancethan other measures.There are some problems in different evaluation mothed and also admitted inthis mothed. Whatever on which mothed, the performance of open-end funds areexcellent than market, it affirmed to the ability of investment and controlling risk.