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Recognition of the Fund Investment Style on VaR-EGARCH and Gruber Model

Author: LiJun
Tutor: SongGuangHui
School: South China University of Technology
Course: Finance
Keywords: Investment Style Style Index Gruber Model VaR- EGARCH Model Style Identification
CLC: F224
Type: Master's thesis
Year: 2011
Downloads: 60
Quote: 0
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Abstract

As a kind of professional financial management tools ,securities investment funds includes a series of advantages such as professional management, collective investment, diversity risk, benefit sharing and risk-sharing. It’s favored by investors and swept the world since it’s appearance. China’s open-end fund market starts late, but it have achieved a great deal of change both in the number and the types. It meets the needs of different investors in the greatest degree of the parties undoubtedly, whether for the investors who diversificate risks by constructing portfolios or the investors who prefer high-risk high-yield investment.Taking into account different risk preferences requirements of investors, the Fund will certainly announce and express their unique investment style. Different investment styles make the formation of different levels of risk and return, which not only ensures the fundamental interests of investors, but also meet the different risk preferences of investors. But in the actual operation, the fund managers often change his investment style, which will damage the interests of investors seriously, so it has an important significance whether the fund manager could comply with his original contract in his investment practice. I found that many documents are based on yield or positions of the style analysis and less from the perspective of risk to identify the Fund’s investment style after reading of those documents related to the investment style of funds. Undoubtedly, this is a negligence of the properties that the Fund is a risk-based financial tool.This article identificates fund investment styles comprehensively by drawing on income-based Gruber model which is about style index return and EGARCH model which is based on risk factors, those two models are more mature now. Most of the studies or research in the past only from the point of view to study the benefits of this fund’s investment style, or simply funds based on risk analysis of investment style perspective. The innovation of this artical is based on the idea of style boxes, and integrate sample fund’s investment style from identified two angles respectively, the rate of return and risk VaR. It takes into account the fund return and risk are two basic properties, makes it more scientific and comprehensive to identificate the styles of fund investment.First, it has not only safeguarded the interests of investors, to make the investment which meet the individual risks and benefits can be protected. In addition, for fund managers, it’s need to build on the evaluation of their performance of investment style based on the same basis. It’s very unscientific if we measure a fund manager’s ability and value just by the rate of return, which is a very one-sided and a single data. This practice also give fund managers a one-sided pursuit of change in investment style and performance incentives, cause the spread of the Fund homogenization, the company increased competition, further fund the company’s profit margin compression; Finally, for regulatory bodies, how to make reasonable and effective regulation, both to safeguard the interests of investors, but also identify the Fund’s actual investment style rely on effective technical means, prevent the homogenization phenomenon of the fund, maintain the Fund’s market development stable and orderly, promote the diversification of the fund market, ensure the Fund’s product diversified and differentiation by rational, comprehensive and scientific monitoring, thereby, promote the development of China’s fund industry and provide a solid guarantee to the prosperity of our economic development.

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CLC: > Economic > Economic planning and management > Economic calculation, economic and mathematical methods > Economic and mathematical methods
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