Empirical study on volatility timing skills in Chinese mutual fund market

Abstract

The purpose of this study is to investigate the volatility timing skill in Chinese mutual fund industry. Mutual fund is the most prevalent investment over the past 20 years and has evolved rapidly with booming economy. Volatility timing skill is the fund managers' ability to capture abnormal returns by predicting the market volatility and correspondingly adjusting the fund's risk exposure. The present study used Busse's single-factor and multi-factor models to test the existence of volatility timing skill. Among Chinese mutual fund managers, according to the results, only two funds confirm the existence of volatility timing skill. Finally the research concludes that Chinese mutual fund market is not mature and has its own particularity so as to limit the application of volatility timing skill in Chinese mutual fund market.