China's Fund Managers Stock Picking, Market Timing Ability And Personal Qualities Empirical Fund Performance Research

Starting late 2005, China's stock market has become extremely bullish and millions of individual investors, who are called "Stock Fans", have entered the market. A new word, however, has emerged. That is "Fund Fan", which means a man who invests in open-ended funds (mutual funds). Unlike stock fans who make money by buying and selling stocks themselves, fund fans have to rely on somebody else, those who manage funds and are called fund managers. Growing attentions have been paid to fund managers' capabilities of stock selection and market timing.The investment fund industry in China has a very short history. After the slow development in the early years, the fund industry has explosively grown with the booming stock market since late 2005. Many rating agencies such as Morningstar have regularly released fund ranking reports, which provide useful reference for fund investors.Fund fans seem to trust those fund ranking reports and buy those top funds ("Star Funds"). This question is:" Are the star funds and star managers really that good? Do the star managers really have superior managerial skills?"China's stock market has gone through an extreme up market and then followed by an extreme down market during the period of 2006 to 2008. This market cycle provides a unique opportunity to test the abilities of star managers.This paper collects the real market data between 2006 and 2008, employs the Treynor-Mazuy model for regression analysis and examines star managers' capabilities of stock selection and market timing.Our findings indicate that some of the star managers to some extent have demonstrated their stock selection and market timing capabilities over the past three years. However, there is no convincing evidence to show that the star managers, as a whole, outperformed the benchmark. Moreover, the star managers have something in common, such as educational background, career path, etc. Nevertheless these characteristics are not unusual among all the fund managers and therefore can't be used to explain why star managers have superior ranks.