Mutual Fund Performance – An Empirical Analysis of China’s Mutual Fund Market

Abstract

This paper investigates the performance of China’s mutual funds in the period 2001-2005 by using mean-variance, downside-risk and value-at-risk approaches. We distinguish between the open-end funds and closed-end funds in terms of their different characteristics and investment styles. The results of this paper reveal most of the Sharpe ratios, Treynor ratios, Sortino ratios and VaR measures are negatively rather than positively signed because of the depression of China’s stock market during this period. For the open-end funds, 96.30% of funds are better than our benchmark index, which is composed of 80% stocks and 20% government bonds. The bond funds have better performance than stock and mixed funds. Regarding the closed-end funds, 41.67% of them have positive Jensen’s alphas when Closed-end Fund Index has been used as the benchmark. The small size funds have better performance than medium and large size funds, and E Fund Management Company has best performance. Although all the returns series is not normally distributed, and from the analysis of efficient frontiers, the MLPM approach is more efficient than MV and VaR approaches, all of the different measures produce the similar results of ranking. There is no significant effect on ranking despite different measures used.