The Investigation on the Reasons of Pattern,Performance and Behavior:Evidence from Taiwan Mutual Fund
The main factors, which influence the performance of mutual funds in a period, are trend, portfolio, the ability of manager groups, luck, and fee. These factors above can be divided into two parts, controllable and uncontrollable factors. Among controllable factors, the portfolio is most important. The sources of the return for the portfolio are three. One of them is asset allocation, which is the portfolio strategy decided by fund managers, who research industries and firms deeply. The others are timing and selecting, however, they are speculative strategies because fund managers earn a lot of return by immediately trading according to market prediction of short term. Funds, as implied by the name, are assets managed by managers, so the performance is attributed to the operations of managers. The early scholars in general research what kind of investing strategies have great performance, and whether fund managers have abilities for timing and selecting. This paper researches another aspect, taking 35 open and close funds as examples and observing whether the operations of fund managers make the performance different or not. This paper takes 1996 to 1998 as a period of study, and the conclusion by the available information is as follows: Among the reasons which make the fund performance different, the negative-correlation between turn-over-rate and return is most significant, and the correlations between return and risk and between return and portfolio are not significant like the former. Two suspicious reasons of why portfolio cannot explain the performance are as follows. One reason is the method of asset classification used by this paper. The key point of this paper is funds' investment, so the criterion of stocks' classification are very important. If the classification criterion is not relevant, the result will go wrong. The other reason is because many funds' portfolio are invested in some stocks, it's easy to generate a situation that all funds' return is changed in the same way to make the performance not significantly different. Besides, this paper also discovers the herding of fund managers. It shows every year fund managers invest 66% of the funds for the market in 11% of stocks in the market, but this kind of behavior is not reasonable to make the performance different.
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