| As an important type of institutional investors,Chinese open-ended stock mutual funds play an important role in the dependence of asset price and the construction of the financial market.Thus,it’s meaningful to study their investment behavior.This paper focuses on the growth tilt of Chinese stock mutual funds,and tries to justify it with the stock-picking ability of funds.First,this paper shows the growth tilt “puzzle” of stock mutual funds.It finds from the sample that Chinese stock mutual funds persistently exhibit a preference for growth stocks over value stocks,despite the fact that value stocks outperform growth stocks on average.Moreover,growthoriented funds don’t underperform their value-oriented peers.Second,this paper tests funds’ skill in picking growth stocks with data on fund’s whole holdings,top-10 holdings,and trading behavior.Lastly,this paper looks deep into the source of the growth-stock-picking ability,and makes explanation for the growth tilt puzzle.This paper finds:(1)stock mutual funds exhibit superior skill in picking growth stocks,in addition,funds’ ownership and trading of growth stocks both possess significant return-forecasting power;(2)It’s the growth-stockpicking ability rather than the value-factor-timing ability contributes to funds’ outperformance.The stock-picking ability is distinguished from the herding behavior;(3)Funds’ stock-picking skill is pronounced during earnings-announcement periods,and the high volatility of growth stocks provides ground for fund’s stock picking ability;(4)This paper finds weaker and insignificant evidence for funds’ stock-picking skill among value stocks.To achieve better performance,funds have to make active management and improve their investment ability. |
