Chinese Asset Managers’ Monetary Policy Forecasts and Fund Performance

John Ammer (), John Rogers, Gang Wang () and Yang Yu ()
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John Ammer: Federal Reserve Board, Washington, District of Columbia 20551
Gang Wang: Institute of Accounting and Finance, Shanghai University of Finance and Economics, Shanghai 200437, China
Yang Yu: Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai 200052, China

Management Science, 2023, vol. 69, issue 1, 598-616

Abstract: Although many central banks in the 21st century have become more transparent, Chinese monetary policy communications have been relatively opaque, suggesting that financial market participants must commit significant resources to predicting the central bank’s actions. We conduct a novel systematic textual analysis of the discussion in the quarterly reports of China fund managers, from which we infer their near-term expectations for monetary policy. We construct an aggregate index of manager expectations and show that, as a forecast of Chinese monetary policy, it compares favorably with both market- and model-based alternative projections. We also show that fund managers act on these expectations and correctly anticipating shifts in Chinese monetary policy improves fund performance. Our results imply that manager skill is an important determinant of fund returns, providing the first evidence from China on a question for which studies of asset management in other countries have reached conflicting conclusions. Finally, we find that expectations are more accurate for funds that commit more analytical resources, have higher management fees, or have stronger managerial educational background.

Keywords: fund managers; Chinese monetary policy; textual analysis (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:69:y:2023:i:1:p:598-616

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