Are active mutual fund managers skilled in picking stock concepts?

Jinlin Fu, Xiaomeng Lu, Yuxin Xie and Binxu Wang

International Review of Economics & Finance, 2025, vol. 103, issue C

Abstract: We provide a novel assessment of active mutual fund managers’ investment skills by analyzing the stock concepts they trade—a unique aspect of the Chinese stock market where stocks are grouped by themes or trends. We find that managers purchase stock concepts that subsequently outperform those they sell, demonstrating genuine investment skill. This outperformance is evident in both returns and earnings and is not driven by private information or concept momentum effects. Additionally, fund managers perform better when trading concepts dominated by growth stocks compared to value stocks. In contrast, retail investors underperform when trading stock concepts. Our findings highlight the value-added role of active fund managers in selecting stock concepts and offer new insights into mutual fund performance evaluation.

Keywords: Active mutual funds; Stock concepts; Investment skill; Chinese stock market; Fund performance evaluation (search for similar items in EconPapers)
JEL-codes: G11 G14 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:103:y:2025:i:c:s1059056025006379

DOI: 10.1016/j.iref.2025.104474

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