Open-end Fund Market Risk Research In China Based On VaR Method

In recent years, with the process of economic globalization and financial integration,China’s financial market has obtained unprecedented development, while financial risksalso aggravates. As one kind of collective investment method managed by experts, open-end fund has become the main participant in the securities market of China. How tomeasure its risks has become the issue concerned by both financial institutions and fundholders. Therefore, it is of important theoretical and practical significance to research onrisks of open-fund market.Focusing on China’s open-end fund market in post-crisis era, this paper employsGARCH model based on VaR theory to carry out the empirical research on China’s open-end fund risks. Selecting the net earnings data of15funds, with Eviews7.0econometricanalysis software’s application to analysis of return time series of fifteen open-end fundscomprehensively, this article works out their yield distributions, and examines theheteroscedasticity and volatility clustering of time sequence by using the ARCH–LMtest. Then in order to establish the VaR-GARCH model to measure the fund risk andestimate VaR of different types of funds, a single fund is set as an example to choose anappropriate model under the hypothesis of t distribution and GED. Finally under the95%and99%confidence level, Kupiec method is employed to conduct the backtrack test ofVaR model’s accuracy. Main conclusions are as follows: t-distribution can depict theleptokurtosis and fat-tail features of fund returns series, while because of the fat tail of tdistribution, the VaR value calculated by GARCH (1,1)-t model overestimate the realrisk. Meanwhile, VaR value calculated by GARCH (1,1)-GED model can reflect thereal fund risk; Under the95%confidence level, GARCH-t model tends to overestimatethe risk and GARCH-GED model underestimates; Under the99%confidence level, bothGARCH-t and GARCH-GED model tend to overestimate the risk. Finally, based onenlightenments of empirical research, corresponding policy suggestions are put forwardaccording to the status quo of China’s open-end fund risk management.