An Empirical Study On The Market-Timing And Selectivity Ability Of Open-end Funds In China

Based on the empirical study on the market-timing and selectivity ability of open-end funds in China, this paper academically complements the study course in this field. Besides this paper depicts the status quo and raises constructive proposals for investors, fund management companies, and regulatory authorities.This paper selects 35 open-end funds , which have the relevant data of those funds from Nov, 2003 and Mar, 2008 , and conducts empirical study on the selectivity and timing ability, using TM model, HM model, CL model. On this basis, it then conducts ARCH test to the stochastic disturbance so as to analyze the real selectivity and market-timing ability under the impact of volatility clustering of time series. The result shows that the conclusion of the three models is basically the same: China's open-end funds lack the market timing ability but possess certain selectivity ability.At the same time, this research creatively carries out sub-studies to analyze the selectivity and timing ability in terms of time period. This paper conducts empirical research with TM-δmodel, which is the expansion of TM model. The research proves that in the raise stage of market, China's open-end funds possess certain timing ability, however in the decline stage of market, they shows significant negative timing ability to some degree. This indicates that fund managers might misjudge the market when it is declining, and they become over-optimistic. The consequence is that they possibly adopt operational strategies such as buying surplus and selling losses .Those strategies will increase the systemic risk of the fund portfolio and ultimately affect the fund's performance.In addition, this research also conducts theoretical analysis on the selectivity and timing ability of open-end funds in China from several aspects such as the criterion of choosing the data analyzing models and the cognitive behavior and motivational of fund managers. In the end, this paper provides relevant policy suggestion.