Does cross-border investment improve mutual fund performance? Evidence from China

Han Han, Zhibin Wang and Xueqing Zhao

China Economic Review, 2024, vol. 86, issue C

Abstract: In this paper, we analyze how Chinese mutual funds' performance is affected by cross-border investments, following the relaxation of investment restrictions on Hong Kong stocks. We find that mutual funds underperform when they increase their H-share holdings, suggesting that easing investment restrictions doesn't improve fund performance. Information asymmetry and the limited ability of fund managers to access H-share information are key factors behind poor performance. And fund managers employ such “bad” strategy to cater to investor preferences. Furthermore, fund managers do not recognize their limitations in investing H-share. We hope our findings give insights into the investment behavior of funds and enhance the development of the Chinese asset management industry.

Keywords: Mutual funds; Cross-border investment; Information asymmetry; Investor preferences (search for similar items in EconPapers)
JEL-codes: G11 G12 G41 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:86:y:2024:i:c:s1043951x24000750

DOI: 10.1016/j.chieco.2024.102186

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