A Reliable Performance Measure to Differentiate China's Actively Managed Open-End Equity Mutual Funds

24 Pages Posted: 16 Feb 2018

See all articles by Ali M. Kutan

Ali M. Kutan

Southern Illinois University at Edwardsville

Hai Lin

Jiangxi University of Finance and Economics

Ping-Wen Sun

Minjiang University - Newhuadu Business School

Bin Yu

Zhejiang University

Date Written: November 1, 2016

Abstract

We compare different fund performance measures to examine which performance measures can generate risk-adjusted returns between high ranked and low ranked China's actively managed open-end equity mutual funds. Our results show that only the 6-factor (Fama and French (2015) five factors plus a momentum factor) alpha as the performance measure meets the criteria. Separated by the 6-factor alpha, better performed funds tend to have larger asset under management and higher percentage of hybrid funds. Through our sample period from July 2004 to December 2015, the highest ranked quintile funds generate monthly 0.24% risk-adjusted return more than the lowest ranked quintile funds. Furthermore, our results from fund return, holding return, and trading data all demonstrate the better performance comes mostly from the bear markets, suggesting those better performed funds exhibit their market timing and stock picking abilities when investors need them most.

Keywords: fund performance measure, risk-adjusted return, China

JEL Classification: G11, G23

Suggested Citation

Kutan, Ali M. and Lin, Hai and Sun, Ping-Wen and Yu, Bin, A Reliable Performance Measure to Differentiate China's Actively Managed Open-End Equity Mutual Funds (November 1, 2016). Available at SSRN: https://ssrn.com/abstract=3118205 or http://dx.doi.org/10.2139/ssrn.3118205

Ali M. Kutan

Southern Illinois University at Edwardsville ( email )

Department of Economics and Finance AH-3141
Edwardsville, IL 62026-1102
United States
618-650-3473 (Phone)
618-650-3047 (Fax)

HOME PAGE: http://https://ideas.repec.org/e/pku30.html

Hai Lin

Jiangxi University of Finance and Economics ( email )

South Lushan Road
Nanchang, Jiangxi 330013
China

Ping-Wen Sun (Contact Author)

Minjiang University - Newhuadu Business School ( email )

Fujian
China

Bin Yu

Zhejiang University ( email )

38 Zheda Road
Hangzhou, Zhejiang 310058
China

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