Study on Timing and Selectivity of China’s Hybrid Mutual Funds

Abstract

With the development of China's financial market, hybrid mutual funds have been favoured by the market because of their features of diversified investment objects, moderate risk and objective return rate of fund assets. This paper aims to analyze the management ability of China's hybrid mutual funds, particularly stock selection and timing ability. On this basis, the paper employs Jensen alpha model and Treynor-Mazuy Model (T-M model) to assess fund managers' stock selection and timing abilities respectively. It empirically implements Jensen's alpha and T-M model to samples of 415 China's existing hybrid mutual funds. The empirical results indicate that a) most of the mutual fund managers own strong stock selection abilities during the sample period but weak timing abilities; b) some of them have the abilities to select stocks outperformed the market as well as to time the market; c) the above abilities are positively related to the fund size in China's hybrid mutual fund market. Hybrid mutual funds in China have become an increasingly popular investment target and this paper helps to assess the performance of this financial instrument quantitatively.