Holding-Based Evaluation upon Actively Managed Stock Mutual Funds in China

We analyze actively managed mutual funds in China from 2005 to 2017. We develop performance measures for asset allocation and selection. We find that stock selection ability from holding-based model is positively correlated with selection ability estimated from Fama-French three-factor model, which is price-based regression model. We also find that industry allocation from holding-based model is positively correlated with timing ability estimated from price-based Treynor-Mazuy model most of the time. We conclude that most actively managed funds have positive stock selection ability but not asset allocation ability, which is due to the difficulty in predicting policy changes.