| I find evidence of valuable private information in the Chinese stock market. First, Chinese actively managed stock mutual funds outperform passive benchmarks including market, size, value, and momentum factors. Most funds appear to have skill, and much of that skill consists of stock-picking ability. Second, Chinese corporate insiders also outperform the market. Private information associated with insider trades is more valuable for stocks of state-owned enterprises and for more volatile stocks. Third, I find strong correlation patterns between the performance of stock funds and corporate insiders. Funds that trade more in the same direction as insiders perform better. Funds' larger shareholding positions correlate more with insiders and perform better. Funds with a higher portfolio concentration in these large positions outperform funds with a lower concentration. Finally, I find evidence of performance erosion for both stock funds and corporate insiders, a sign of improvement in market efficiency. |
