Study On Relationship Between Reliance On Public Information And Fund Manager Ability

Until the end of 2013, the management scale of fund in our country has broken 4 trillion Yuan, the fund companies have also been the most influential institutional investors in Chinese capital market. Among all the kinds of funds, stock funds account for more than half in both quantity and scale. With the idea that buying funds are buying fund managers deeply rooted among the people, to evaluate the skills of fund managers becomes a hot topic of the researchers. In addition to the three traditional classical models, there is multi-factor model, timing and stock-choosing performance evaluation model, DGTW model and so on.The process of portfolio management is to collect and deal with information. Fund managers will have both public and private information. Theoretically speaking, it is hard for investors who only know public information to obtain abnormal returns while investors who know more accurate information will get better returns. Marcin Kacperczyk and Amit Seru(2007) proved that the sensitivity of public information for informed investors is less than that for uninformed investors using the model of Grossman and Stiglitz(1980), in other words, informed investors rely on less public information.Single and multiple regressions are used in this paper to analyze the relationship between Reliance on Public Information (RPI) and the skills of fund managers. Firstly, RPIs of closed-end funds during the period from 2003 to 2012 are calculated with stock rating data. Then, we respectively make regression of RPIs and the Jensen’s Alpha, Alpha of both T-M model and C-L model to prove the effectiveness of RPI in evaluating the skills of fund managers.The empirical results indicate that RPIs of most closed-end funds are above 0.5 which means that the Reliance of Public Information for closed-end fund managers is generally large. At the same time, there is a negative correlation between RPIs and durations of funds while the relationship between RPIs and sizes of funds is not obvious. There is also a negative relationship between RPIs and abnormal returns of funds. However, the interpretability of RPIs is not that enough for abnormal returns. At the end of the paper, some explanations of the result are provided.