Fund Performance And Systematic Risk Of Funds' Stock Holdings

Equity mutual funds are regarded as a modern investment vehicle.Because equity mutual funds can aggregate enough amount of individual investors' money to form a diversified portfolio,gradually individual investors delegate the wealth management duties to equity fund managers.With the rapid development of China's securities market,the fund industry continues growing,the fund products are increasing,and innovations keep emerging.Among them,open-end mutual funds have gradually become the main type among fund market products.However,there are also problems which can't be ignored behind the booming of the China's fund industry.First of all,fund managers' skills vary widely.Secondly,many fund managers are lack of risk management skill.For example,the 2008 and 2015 stock market crash events impact heavily on the China's fund industry,especially for equity funds which suffered from huge losses and eventually are closed.Therefore,based on multi-dimensional perspectives on China's securities investment fund,an integrated,comprehensive,and systematic evaluation has important theoretical and practical significance.From the perspective of investors,a comprehensive study of China's actively managed open-end equity mutual funds can provide investors with investment decision-making reference information,and it can be used for reasonable evaluation of open-end mutual funds' operation performance.At the same time,it can also make the investors invest rationally according to their own needs in the face of a variety of fund products in the market and bid farewell to a simple choice based on the historical performance of the fund.When investors buy funds,in addition to considering income of the Fund,the risks must be also considered.From the perspective of funds,the fund performance and investment behavior evaluation can help the fund better understand their own advantages and disadvantages,and urge the fund companies to adjust their own management and operation,optimize asset allocation,and improve fund performance.From the perspective of policy makers,to understand what funds' preferences are in different market conditions,whether funds can play the resource allocation role efficiently,and whether funds can help maintain the market stability is very important.Based on the three dimensions – fund return,funds' stock holdings,and funds' trading,we perform a comprehensive and detailed study on China's actively managed open-end equity funds by using the six-factor model,and make a comprehensive evaluation of the China's open-end equity and hybrid funds.The main contributions of this paper are as follows:(1)This paper uses the six-factor model to evaluate the performance and investment behavior of the fund;(2)It includes an analysis for funds under different market states(bear/bull markets),making a more thorough study of the performance and investment behavior of the sample funds.We use the model with and without the bull dummy variable to evaluate the performance and investment behavior of the fund.(3)Using the portfolio approach,we treat all the funds,equity funds,and hybrid funds as a group separately and compare their performance.In addition,we also use a fund performance measure – 6-Factor Alpha to rank funds as different groups and compare different groups' performance.In this study,our sample includes actively managed open-end equity funds from July 2004 to December 2015.We find that all sample funds,stock funds and hybrid funds generate significant risk-adjusted returns and have timing abilities.Hybrid funds,for both raw and risk-adjusted returns,perform better than stock funds.Furthermore,hybrid funds' timing abilities are also better than the stock funds' timing abilities.From the 6-Factor Alpha ranked fund portfolios,we find that 6-Factor Alpha is a good indicator of fund performance,which can effectively identify funds with better trading skills.In addition,this study also draws some other meaningful conclusions,which have been discussed in the empirical results section.This thesis is divided into five parts:The first part is the introduction.It mainly introduces the background of the thesis,the meaning of the research,the framework of the thesis,the research methods,and some important concepts related to this article.It is intended to pave the way for the further research.The second part is the domestic and foreign literature review,analyzing and summarizing the domestic and foreign literature on the fund performance evaluation theory which includes the classic theory of fund performance evaluation and its development trend.The third part is the part of data,model and simple statistical part.It mainly introduces the composition of sample funds,the source of data,the selection of the sample period,the meaning and calculation method of six factors model,the definition of bull and bear market states,variables,the meaning of the 6-Factor Alpha indicator and summary statistics of the 6-Factor Alpha ranked portfolios.The fourth part is the empirical result part.Based on the three dimensions – fund return,funds' stock holdings,and funds' trading,this paper uses the six-factor model to study the fund performance and investment behavior where funds are grouped by fund types and ranked by the 6-Factor Alpha.The fifth part summarizes the paper,providing the policy suggestion and the future development direction.