Fund Manager Skills And Its Evidence

Whether fund managers have skills,and how to measure their skills have always been the focus of scholars and the financial industry.Based on the capital asset pricing model(CAPM)and Fama-French model,scholars in the existing literature have proposed a variety of theoretical models with excess return as the criterion for fund performance evaluation.They also decompose the skills into the aspects of timing and stock selection.Both foreign or domestic scholars have not yet formed a unified view on the existence of fund managers' skills based on above theories,but Berk and van Binsbergen(2015)proposed that value added can more reasonably and accurately measure the fund managers' investment management ability.From the perspective of value added,this paper studies fund managers' skills and related issues.This paper uses the data of domestic active managed stock mutual funds from 2009 to 2018,and verifies that stock funds have diminishing returns to scale at both the fund level and the industry level by means of recursive demeaning.Based on Berk's and van Binsbergen's(2015)value added model on the assumption of diminishing returns to fund scale,this paper calculates and studies skills.The value added is obtained by multiplying the fund size managed by managers in the previous period by the excess rate of return of current fund managers after risk adjustment,which represents the wealth earned by fund managers from the stock market and reflects their skills.Empirical research shows that on average,fund managers in China can gain positive value-added of fund wealth,which means that they have skills.Some fund managers do not know the optimal asset size of the funds they manage,and even blindly pursue the management of large assets,resulting in the loss of value,which also reflects their lack of skills.Compared with the fund size and the excess return rate,the value added can capture both the change of the return rate and the fund size.It has advantages in evaluating the manager skills.The findings of this paper provide new evidence to support the view that fund managers have the ability to manage their investments,help fund investors to select suitable funds,and provide new evaluation criteria for practitioners and regulators.