Investment Style Drift and Performance Evaluation of Green Funds

Based on the data of daily return of China’s equity green funds and equity hybridist green funds from 2015 to 2019, the paper adopts Fama-French five-factor model and the improved TM-FF5 model to test the effects of the investment style drift of green funds and fund manager’s ability in stock selection and style timing on the performance of green funds in different test periods. The results of the empirical study show that there is investment style drift in green funds, which will have a negative effect on the performance of green funds in the short and medium terms. Green funds as a whole haven’t gained excess returns from the green ideas. In addition, the profit style timing ability of green fund managers has the most significant impact on the performance of green funds only in the long term, while the market value timing ability, book to market ratio timing ability, investment timing ability, and stock selection ability have little impact on the performance of green funds.