The Research On The Market Timing Ability Of Chinese Mutual Funds

The market timing ability of mutual fund managers can be defined as the ability to anticipate whether the general stock market is going to rise or fall and to adjust the composition of their portfolios accordingly. That is, if the managers think they have the ability to anticipate that the market is going to rise, they shift the composition of their portfolios they manage from less to more volatile securities. If they think the market is going to fall, they shift into the opposite direction. By doing such shifts, mutual funds probably can outguess the market. The market timing ability, which origins in the breakdowns of performance, has become a main index for evaluating investment performance of mutual funds.Though the mutual funds industry in China has already made the fast and healthy developments, there are big differences among various Chinese mutual fund performances. From the perspective of the components of mutual fund performance, to some extent, it is the different market timing ability and different selectivity ability both of which cause the different performance of mutual funds. Therefore, the evaluation of market timing is very important. This paper evaluates the market timing ability of Chinese mutual funds by using T-M, H-M, TM-FF3 as well as two-factor model, carried out on a sample of 12 closed-funds and 16 open-funds, after briefly reviewing the related literatures. It can provide some references of investment for both investors and mutual fund managers.The results show that, on one hand, TM-FF3 dose not fit with Chinese situation. On the other hand, there is no overwhelming evidence that Chinese mutual funds have the significant market timing ability when the weekly data are used in empirical investigation.But there is different result when the monthly data are used. We found that open-funds have show market timing ability, though most of the results are not significant in statistical examination. This also proves that there will be different results when applying the different unit of time in empirical test. In term of Chinese open-funds, the models have better analatical ability when extending the unit of study time.