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【Zhang Xueyong】Bank affiliation and timing ability of mutual funds: Evidence from China

Published:2024-03-28  Views:

Recently, the paper entitled “Bank affiliation and timing ability of mutual funds: Evidence from China”, which was written by our school’s Professor Zhang Xueyong and Dr. Wang Xiaoxiao, School of Economics, Shandong University (graduate of 2023 PhD in Finance), has been officially accepted by the Journal of Banking and Finance, an international authoritative journal in the field of finance.

This study analyzes the impact of commercial bank affiliation on mutual funds’ timing ability. In contrast to the findings for developed markets, affiliated funds outperform unaffiliated funds in China. Here, we explain affiliated funds’ outperformance using 3,351 Chinese equity and hybrid mutual funds between 2008 and 2019 to demonstrate that affiliated funds are better timed than unaffiliated funds. One underlying mechanism is that affiliated funds benefit from information advantages due to the unique position of commercial banks in China’s economy. Further findings reveal that better timing ability subsequently benefits commercial banking groups, indicating that commercial banks and affiliated funds can share a mutual incentive compatibility relationship. A quasi-natural experiment of variations in bank affiliation verifies a causal interpretation of these findings, and our results continue to hold across a set of robustness checks.

This paper contributes to the existing literature in several dimensions. First, this study extends the literature exploring the relationship between financial conglomerates and affiliated funds from both the research background and perspective. Second, this article is also related to the emerging literature on the economics of timing ability and contributes to the literature studying the determinants of timing ability. Third, this paper extends the literature to investigate how fund managers learn about the information through their affiliation with banks. Specifically, this study contributes to this literature by showing that affiliated funds time better because affiliation with commercial banks provides macro information advantages for banks’ intrinsic ability to forecast macroeconomic tendency and government policy.


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