Performance persistence in Chinese securities investment funds

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Gao, Jun
O'Sullivan, Niall
Sherman, Meadhbh
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Elsevier B.V.
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This study examines the performance persistence of Chinese equity securities investment funds during the period between May 2003 and May 2014. We apply the recursive portfolio formation methodology of Carhart (1997). The results from sorting funds either by past 4-factor alphas or by t-statistics of past alphas suggest that the top ranked decile portfolio yields statistically and economically significant forwarding looking alphas. In respect of past decile loser funds, there is no evidence that underperformance among Chinese loser funds persists. In addition, we apply the recursive portfolio formation methodology for alternative ‘smaller’ portfolios of a fixed size and find that almost all the smaller portfolios of past winning funds produce positive and statistically significant forward looking alphas. Hence an active portfolio strategy for the Chinese securities investment fund industry of selecting a small number of past outperforming funds may earn positive abnormal returns after the deduction of management fees.
Chinese funds , Fund performance , Persistence
Gao, J., O'Sullivan, N. and Sherman, M. (2017) 'Performance persistence in Chinese securities investment funds', Research in International Business and Finance, 42, pp. 1467-1477. doi:10.1016/j.ribaf.2017.07.085
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