Having Been Trying Hard? The Validity of Unobserved Actions of Open-End Fund Managers in China

In this paper,we explore the impact of unobserved actions and effort of open-end fund managers in China stock market on fund returns using the return gap—the difference between the reported fund return and the return on a portfolio that invests in the previously disclosed fund holdings.We document that the return gap is significantly larger than zero from year 2004 to 2007,which shows that in general the effort of fund managers can create value.If investors follow the previously disclosed fund holdings,they obtain less value than that provided by funds in bear market,and get more return in bell market.The difference is much more obvious for balanced-open-end funds.Further,the return gap is also significantly correlated to fund style and size.