The performance persistence of Chinese open-ended funds

Abstract

With the rapid growth of Chinese fund market, as at July 31, 2012, there were 74 fund companies and 800 open-ended funds in the market. The Chinese open-ended fund market is an emerging industry with relatively thin research work done compared to that of developed countries. Therefore, this paper attempts to test persistence in the performance of Chinese open-ended mutual funds. This paper chooses all the data from January, 2004 to December, 2011 of 33 open-ended funds. The empirical study indicated that the performance persistence of Chinese open-ended fund was insignificant in both short-term and long term. Nevertheless, the relative performance persistence as compared with market benchmark is significant in the short term but insignificant in the long term. Therefore, in the short term people can invest in the funds of which short-term performance are better than the market bench mark to receive the excess return. At the same time, investors should take the situation of fund companies, fund managers and other factors into consideration.