Is tail risk priced in the cross-section of Chinese mutual fund returns?

Liuyong Yang, Yijia Long, Huaigang Long, Adam Zaremba and Wenyu Zhou

Finance Research Letters, 2022, vol. 50, issue C

Abstract: We investigate the pricing of tail risk in the cross-section of Chinese mutual fund returns using a sample of 2563 funds from 2007 to 2021. We document a strong and positive relationship between the time-varying tail risk beta and one-month-ahead mutual fund return, which is robust to various considerations. Specifically, the top tail risk quintile portfolio outperforms the bottom one by 1.85% per month. We also note that Chinese mutual funds with high tail risk loadings tend to be young, have high management fees, low fund flows, and substantial return volatility. However, unlike the U.S. market, fund size and managerial ownership do not directly relate to tail risk exposure in China.

Keywords: Tail risk; Chinese mutual funds; Asset pricing; Tail risk betas; Fund characteristics (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322004810

DOI: 10.1016/j.frl.2022.103298

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