| dc.description.abstract | In the current Taiwan funds market, the asset under management (AUM) of domestic equity funds has shown little growth, even contraction; in contrast, the AUM of equity index funds is growing tremendously. Polaris Investment Trust launched the “Polaris Taiwan Top 50 Tracker Fund” on June 25th, 2003, since then the AUM has grown to 100 billion TWD, with more than thirty thousand retail investors investing in the fund. This clearly indicates that domestic investors are becoming more and more open to equity index funds.
The objective of my thesis is to investigate the performance difference between domestic equity funds and Polaris Taiwan Top 50 Tracker Fund. In the first part, Sharpe ratio, Treynor ratio, Jensen’s α, and the four-factor analysis are utilized to assess fund performance. In the second part, I expand the analysis to take account of the impact of subscription and redemption fees. The result shows that before consideration of transaction fees, Polaris Taiwan Top 50 Tracker Fund does not have an advantage in terms of performance over domestic equity funds. However, as the number of transaction increases, transaction fees accumulate, the performance of Polaris Taiwan Top 50 Tracker Fund due to its lower total expense ratio starts to improve substantially against most of other domestic equity funds, no matter in terms of Sharpe ratio, Treynor ratio, Jensen’s α, or the α of the four-factor model.
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