China-focused Mutual Funds: A Study of Performance, Selectivity and Market Timing:

Abstract: This study examines the performance of 36 China-focused mutual funds advertised and sold in Sweden. We use Jensen's alpha, the Treynor-Mazuy model and the Henriksson-Merton model in order to evaluate overall performance, stock selection abilities and market timing skills of the fund managers. The traditional unconditional models are also extended to condition on public information and allow for time-varying betas following Ferson and Schadt (1996). For both the unconditional and conditional versions, we find evidence suggesting that the fund managers possess good stock selection skills and overall performance. Further, the fund managers appear to have poor market timing abilities. When the conditional and unconditional models are compared, the evidence of good overall performance, good stock selection abilities and poor market timing skills is slightly weaker for the conditional versions.