Composite Performance Measures : Evidence on Chinese Stock Exchanges

With China's full liberalization of markets in 2007 due to its membership in the World Trade Organization (WTO), interest in China as an investment market is increasing. With this increased interest and the growing transparency of China's financial markets, more focus is needed on measuring the inclusion of Chinese investment in an actively managed portfolio. We use four portfolio performance measures that are commonly used by industry professionals to analyze the performance of different indices in both the Shanghai and Shenzhen Stock Exchanges. The Sharpe measure, Treynor measure, Jensen's alpha, and compounded annual growth rate (CAGR) are used to analyze various stock index and composite performance for the period from 1994 to 2003. Also, we compare index performance for three subperiods: precrisis (1994-96), Asian crisis (1997-98), and postcrisis (1999-2003). This is an application of index data from the perspective of an average investor or fund manager who is interested in analyzing performance of sector-specific portfolios. Empirical results provide practical usage and insight for investors when considering the addition of such portfolios to enhance their overall portfolio's value. The results suggest that the Shanghai and Shenzhen B-share indices as well as the Shanghai utilities index provide enhanced return during our examined period.