The Research On Stock-picking Ability Of Funds From The Perspective Of Earning Announcements Alpha

With rapid progress of mutual funds in China,fund performance evaluation attract lots of attention of theory and practice fields.The traditional evaluation methods have many disadvantages in depth and system in China,which can't effectively guide healthy development of our fund industry.We test whether fund have stock-picking skill by comparing their holding prior to earnings announcements with the returns realized at those events, reporting market-adjusted returns (MAR) and benchmark-adjusted return (BAR). This approach largely avoids the joint-hypothesis problem. We look at how performance is correlated with fund characteristics.We evaluate the fund performance on average and the links fund between fund return and its characteristics,find that, on average, stocks that funds hold earn significantly higher returns at subsequent earnings announcements than the market and the benchmark stock portfolio,and display persistence in our event return-based metrics, may brings our market stability. This result shows that fund have some stock selcecting ability, which traditional methods may estimate.Meanwhile, the result shows that funds on average has some selecting ability on stock species and investment allocation.But which funds invest most plays worse than that they invest little less.We also find funds that do well turns to invest more in stocks and tend to have large size.Finally, according to the methodology of research, the author provides some disadvantages and the direction of further research.