Abstract:
This thesis examines mutual fund managers’ skill in China using data from 2001 to 2014. We find mutual fund managers have superior skill in predicting next quarter’s corporate earnings news and this finding holds after distinguishing between luck and skill using bootstrapping analysis techniques. However, this superior ability disappears in the 2005-2007 split-share structure reform, which is a unique privatisation process of converting non-tradable shares into tradable shares in China. Using buy-and-hold adjusted abnormal returns as a proxy for long-run stock performance, we find that stocks with fund ownership before the reform significantly underperform in the three-year post-reform period. When controlling for the interactions between mutual fund ownership and state ownership, the negative effect of fund ownership on performance disappears and the positive impact of state ownership on performance decreases with an increase in fund ownership. These results indicate that mutual fund managers generally have superior skill in China albeit their skill may be compromised by political pressure.
