Abstract
“Worshipping value investing in the bear market and everyone is ‘Buffett’ in the bull market” is a general impression of China’s stock market. This article uses the open-end fund holdings data from 2006 to 2015 to test whether the investment behavior of fund consistent with value investing both in the bear market and the bull market. This paper finds that the stock with higher fund holdings in the bear market is positively related to the next quarter and the next year’s unexpected earnings, but not in the bull market. At the same time, similar conclusions have been drawn from further analysis of the new-in and new-out investment behaviors. Overall, this paper demonstrates that “the bear market follows the value investment, while the bull market ignores the value investment” has some truths.
Highlights
At the end of 2016 there are more than 3000 open-end funds in Chinese capital market, many of which in its investment philosophy, said the “value investing” words, as one of its means of propaganda
The conclusions are as follows: First of all, this article found that to the top ten awkwardness in 2006 to 2015 the entire sample period, the shareholding ratio of the fund is significantly positively correlated with the unexpected earnings in the quarter, indicating that the fund is heavily loaded with the stock are generally medium-term value of the stock, indicating that the fund has at least a certain value investment
The results show that the increase or decrease in the shareholding ratio of the fund in the bear market is positively related to the unexpected earnings in the quarter and the year, indicating that the holdings are generally medium-term and long-term stocks, indicating that the fund has a certain forecast of long-term value information capacity, while the increase or decrease in the shareholding ratio in the bull market is not significantly related to any unexpected earnings, indicating that the stock with a high shareholding ratio does not show significant value information in the future
Summary
At the end of 2016 there are more than 3000 open-end funds in Chinese capital market, many of which in its investment philosophy, said the “value investing” words, as one of its means of propaganda. The reality of the market is that the mutual funds often show the irrational behavior as the general investors, such as the herding effect; seeking after a variety of hot theme stocks, over-optimistic in the bull market; showing a serious investment style drift and with the stock market trend drift changes significantly; the fund managers have different stock picking and timing abilities in the bear and bull markets, and in the bull market they performed much cautious; the fund investors tend to chase the performance in the bull market, while they tend to ignore the performance in the bear market, which makes the fund managers have different incentives; increasing the stock volatility. The second part is the literature review and research hypothesis; the third part is the empirical analysis; the fourth part is the conclusion and the suggestion
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