China-Focused Mutual Funds

Chih-Hsiang Chang, Hung-Gay Fung and Pikki Lai

Chinese Economy, 2010, vol. 43, issue 5, 5-14

Abstract: This study examines the performance of China-focused mutual funds using monthly returns for the five years from 2004 through 2008. A two-beta model is used to examine the performance of the fund managers in two aspects: (1) ability to select high-performance stocks, and (2) ability to load up on high-beta stocks in an up market and to switch to low-beta stocks in a down market. Eight of the ten mutual funds examined have a positive and statistically significant Jensen's alpha, a measure of superior return performance. The up-market betas are generally small and statistically insignificant, while the down-market betas are large and statistically significant. These results imply that mutual fund managers do not utilize good market timing.

Date: 2010
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