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Do fund managers' tones predict future performance? Evidence from China

Author

Listed:
  • Liu, Xiaoming
  • Shen, Xieyang
  • Wang, Changyun
  • Zeng, Jianyu

Abstract

This paper examines the relationship between the fund managers' tones and future fund performance based on the Chinese mutual fund data. Using the textual analysis method to construct the tone measures of funds' periodic reports, we find that the tone in a fund report is a positive predictor of the fund performance. Funds with positive tones outperform those with negative tones by 2.4% per year on Fama-French three-factor alpha. Differences in fund managers' abilities drive this performance gap: Fund managers with positive tones have stronger stock-picking abilities. We also investigate the influencing factors of fund managers' tones and investors' reactions to managers' tones. Our findings suggest that the tones of funds' reports are informative for investors.

Suggested Citation

  • Liu, Xiaoming & Shen, Xieyang & Wang, Changyun & Zeng, Jianyu, 2023. "Do fund managers' tones predict future performance? Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:pacfin:v:82:y:2023:i:c:s0927538x23002159
    DOI: 10.1016/j.pacfin.2023.102144
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    More about this item

    Keywords

    Mutual fund; Textual analysis; Disclosure; Fund performance;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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