Is Chinese Mutual Fund a Good Choice of Investment?

Abstract

With the development of Chinese economy, Chinese household are wealthier and looking for good investing instrument. Meanwhile, Chinese mutual fund industry has grown to be the biggest category of asset management. Therefore, whether Chinese mutual fund is a good choice of investment become worth discussion. This article explore this question from 4 angles: the average performance, the performance persistence, the behavioral biases of mutual fund managers, and obstacles for investors from realizing profits. And we find Chinese mutual funds on average can beat their benchmark and their performance persists at least in the following year. However, mutual fund managers could be overconfidence especially after achieving good performance, and there are also behavioral biases of investors preventing them from making profit through mutual funds. In conclusion, even though Chinese mutual fund on average have relatively good returns, realizing profit through them is not an easy job.