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A performance evaluation of Chinese mutual funds

Author

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  • Halil Kiymaz

Abstract

Purpose - – The purpose of this paper is to examine the performance of Chinese mutual funds during the period of January 2000 to July 2013. Emerging market funds provide investors with alternative risk exposure for their portfolios. The Chinese market has developed rapidly and differs from developed markets regarding wide range of market and economic characteristics, including size, liquidity, and regulation. The performance of these funds is investigated by using various risk adjusted measures. The study also compares performances of mutual fund subgroups and explains the factors influencing their performances. Design/methodology/approach - – This is an empirical paper using various risk performance measures. These measures include the Sharpe ratio, Information ratio, Treynor ratio,M-squared and Jensen’sα. The data comprises 1,037 funds. These funds are further divided into ten subgroup of funds based on their classification: equity (484); aggressive allocation (95 funds); conservative allocation (18 funds); moderate allocation (85 funds); aggressive bond (92 funds); normal bond (52 funds); guaranteed (29 funds); money market (53 funds); and QDII funds (119 funds). A cross-sectional analysis of fund performance is performed using Sharpe and Jensen’s measures as dependent variables and fund-specific variables (Age,Turnover,Tenure,Frontload,Redemption fees, andManagement fees), market-specific variables (P/E ratio,P/B ratio,Market capitalization), and fund types as independent variables. Findings - – The findings show that Chinese funds generate positiveαs for their investors. The highest return is provided with aggressive allocation funds followed by moderately aggressive allocation funds. The average Jensen’sαis the highest in aggressive allocation funds. QDII funds do not provide significant positiveαs; in several instancesαs are negative. Further analysis of sub-periods show that Chinese funds do not consistently provide excess returns and show great variations. The study also finds that older funds, funds with higher fees, high price to book ratio, and smaller funds continue to perform better than other funds. Originality/value - – This study adds value by focussing on Chinese funds and risk/return characteristics of these funds. The research will further explore factors explaining these returns.

Suggested Citation

  • Halil Kiymaz, 2015. "A performance evaluation of Chinese mutual funds," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 10(4), pages 820-836, September.
    • Handle: RePEc:eme:ijoemp:ijoem-09-2014-0136
    DOI: 10.1108/IJoEM-09-2014-0136
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    Cited by:

    1. Dorota Żebrowska-Suchodolska & Andrzej Karpio, 2022. "Study of the Skills of Balanced Fund Managers in Poland," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 16(2), June.

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