Study on Fund Sustainability Based on Market Risk Level

• 1、Bank of communications Hunan Branch

Abstract：In this paper, we take public equity funds and equity-biased hybrid funds during the period from 2011 to 2021 as our research samples, and use the Fama-French three-factor theory to analyse the factor risk exposure problem of the funds, and use the least-squares model to classify the sample funds into four major categories of small-cap equity funds, large-cap equity funds, value equity funds, and growth equity funds for consideration by using the SMB factor and the HML factor. Meanwhile, based on the Fama-French three-factor model, we further investigate the persistence of historical performance and alpha coefficients using cross-sectional regression analysis. Unifying the market risk level of different quartile portfolios to examine the fund performance sustainability makes it possible to examine the subject without the interference of some unnecessary factors. In this paper, we use historical alpha coefficients to construct a simple performance evaluation strategy and analyse it in a multi-directional comparison with China Galaxy Securities fund ratings, an authoritative domestic rating agency, which has significant predictive power for future fund performance and can help investors and professional rating agencies to evaluate the fund from another new perspective.

Keywords： Finance Equity Fund Fama-French three-factor theory