Understanding emerging market equity mutual funds

The case of China

Authors

  • Nan Li Department of Business and Economics, California University of Pennsylvania
  • Crystal Yan Lin School of Business, Eastern Illinois University

DOI:

https://doi.org/10.61190/fsr.v20i1.4687

Keywords:

Emerging markets, Mutual fund performance

Abstract

Investing in emerging equity markets is always a challenge to individual investors, even though the growth potential of these markets is attractive because of their fast economic development. This paper contributes to individual investment by investigating the characteristics of the Chinese stock market through a study of the Chinese equity funds. We find these Chinese funds outperform the stock market benchmark significantly with their Sharpe ratio values; but when performance is measured by asset pricing models, the evidence fades. In addition, larger funds outperform small or medium sized funds, regardless of the model and measurement selection. Our results suggest individual investors should favor actively managed equity funds when total-risk adjusted return is a concern and they should choose indexed funds if market-risk adjusted return is the objective. Investors should generally prefer larger equity funds over smaller funds when investing in the Chinese stock market.

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Published

2011-03-31

How to Cite

Li, N., & Lin, C. Y. (2011). Understanding emerging market equity mutual funds: The case of China. Financial Services Review, 20(1), 1–19. https://doi.org/10.61190/fsr.v20i1.4687

Issue

Vol. 20 No. 1 (2011): FSR Spring 2011

Section

New Original Submission

License

Copyright (c) 2011 Academy of Financial Services

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