The Research On The Selectivity And Timing Ability Of Chinese Mutual Fund

The selectivity and timing ability of mutual funds is an important part of the mutual funds performance estimating theory. The selectivity and timing ability divide the performance of mutual funds into two parts, first, timing ability, that is to say the ability of forecasting the price trend of the whole stock market to the fixed income security market; second, selectivity ability, that is to say the ability of forecasting the price trend of one stock to other stocks, through estimating these two abilities, we can analyze the performance of mutual funds deeply. The mutual funds industry of our country is being in the period of quickly development, so deeply investigating the origin of the performance of mutual funds is theoretically and practically important.This article use the models of TM-FF3, CL-FF3 and B-FF3, investigating the selectivity and timing ability of 20 close mutual funds and 54 open mutual funds during the period of 2004.2.27 to 2007.12.31. The result of the research is: mutual funds of our country have certain selectivity and timing ability, but not exist universal, only a small part of mutual funds exhibit this ability.To the current situation of Chinese mutual funds'selectivity and timing ability, we think the mainly reasons are: on system factor, the government credit instead of marketing credit brings, single institutional investor, and mutual funds'fire wall has not yet been established perfect; on market factor, the security market is excess speculation, the quality of public companies is low, liquidity insufficient in declining market, and lack of derivatives instruments that can effectively hedging risk; on investors factor, excess centralized investment, obviously conformist mentality, and excess hope of short term profits; on mutual fund companies factor, lack of research ability, illegal behavior happens time by time, and agent conflict to investors is stand out; on mutual fund mangers factor, lack of selectivity and timing ability, tenure is too short, and agent conflict to mutual fund company is stand out.Regarding this, we put forward suggestions of improving Chinese mutual funds'selectivity and timing ability: firstly, establish market credit, enrich institutional investors and derivatives instruments, and educate the investors; secondly, establish mutual funds' fire wall, strengthen the qualification examination of IPO companies, improve information disclosure system of listed companies, and change proof system of inside trading; thirdly, improve the research ability and investment decision ability of mutual fund companies and mutual fund mangers, establish reasonable mutual fund manger ability evaluation system, reduce agent conflict, improve risk management system, improve the ability of market risk recognition, avoidance, controlling and dealing.