The empirical study on volatility timing ability of Chinese growth style mutual funds

Abstract

The purpose of this paper is to examine the volatility timing abilities of Chinese growth style mutual fund managers by constructing single factor model with Busse volatility timing model, choosing the growth style mutual funds which found before 2007 as the sample, January 4, 2007 to December 30, 2011 as the sample interval. And the model is incorporated return timing factor in order to remove the influence of return timing abilities. The empirical result shows that the majority of the funds’ volatility timing coefficients are negative, but only 33.33% pass the significance test, which shows that small part of Chinese growth style mutual funds has significant volatility timing abilities. And the volatility timing coefficient is small, indicating that volatility timing skills of fund managers are weak. The reasons are unpredictability of the policy in China and lack of Short-Mechanism which limit volatility timing abilities of fund managers.