Monetary Policy Expectations, Fund Managers, and Fund Returns: Evidence from China

John Ammer, John Rogers, Gang Wang () and Yang Yu
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John Ammer: https://www.federalreserve.gov/econres/john-ammer.htm

No 1285, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Although many central banks in the 21st century have become more transparent, Chinese monetary policy communications have been relatively opaque, making it more difficult for financial market participants to make decisions that depend on the future path of interest rates. 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-based and model-based alternative projections. We find that expectations are more accurate for funds that commit more analytical resources, have higher management fees, and with stronger managerial educational background. We also show that fund managers act on these expectations, and that 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. economy.

Keywords: Chinese monetary policy; Fund managers; Textual analysis (search for similar items in EconPapers)
JEL-codes: E52 G23 (search for similar items in EconPapers)
Pages: 49
Date: 2020-06-25
New Economics Papers: this item is included in nep-cba, nep-cna, nep-mac, nep-mon and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1285

DOI: 10.17016/IFDP.2020.1285

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