An Empirical Study On Fund Manager 's Investment Capability

With the development of China’s fund industry, open-ended funds are increasingly regarded as important investment instruments. And here comes the problem:how to measure their investment skills and pick out those skilled managers? We provide a unique approach for determining the managerial skill that is the manager’s reliance on public information. We first show theoretically that the responsiveness of a fund manager’s portfolio allocations to changes in public information decreases in the manager’s skill. We then use brokerage analysts’ stock recommendations as the proxy for public information and related these recommendations changes to fund portfolio changes so as to formulate our core proxy-RPI, which is the unadjusted R square of the regression model. And then we relate RPI with fund characteristics such as size, age and expenses to have a succinct understanding of RPI. At last we use RPI and those traditional fund performance measures to test our main prediction. Consistent with RPI containing information related to managerial skills, we find a strong inverse relationship between RPI and various existing measures of performance.