Persistence In Mutual Fund Managers' Market Timing And Stock Selection Abilities

Mutual fund, as a popular investment tool, is well known for its "professional management". This means that fund managers with terrific ability to investment and broad information can help them analyze the stock market from different points of view, which makes investors trust them and ask for more return and long term persistence.This paper examines persistence in market timing and stock selection abilities mutual fund managers, which will help investors have better strategy in mutual fund investment. And on the same time, this paper provides suggestions for the market regulation of fund, which make much sense both in literature and practice of the development of Chinese mutual fund market.This paper measures managers'persistence of market timing and stock selection abilities by Carhart (1997) model, and the convexity capture method is also used in the ranking and regressing of the managers' returns. The main data set consists of monthly returns of fund managers from the period of the year of 2003 and 2009. We find that fund managers have timing abilities but no superior selection performance, though both returns are not significant. The paper also shows significant persistence in both abilities of all the managers' returns as well as in best, worst or medium performers. In the further analysis, we find that fund managers show persistence in either short-term or long-turn periods, but with better performance in timing and stock selection performance. When different data frequency are applied, fund managers do not show persistence in their performance over two consecutive years, while the persistence exist in months, quarters, semi-years and nine month period.The study enriches the empirical research of mutual fund managers' persistence in market timing and stock selection abilities in China. It offers support for further study of fund managers, and investment opinions for investors.