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Incubation and copying equity funds in China

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  • Wang, Yaping
  • Paek, Miyoun
  • Ko, Kwangsoo

Abstract

This study provides evidence on incubation practices in Chinese equity funds and examines the profitability of copying funds. The empirical findings are as follows. First, the incubation practice is evident among Chinese equity funds. Second, our findings exclude the profitability of copycat funds. An advisory company's fund incubation makes it harder to free-ride on new funds than to free-ride on old funds. Third, the logit analysis shows that copying could be successful for those funds with low performance or low turnover ratios. Finally, incubation is generally undertaken for new funds in a bullish market.

Suggested Citation

  • Wang, Yaping & Paek, Miyoun & Ko, Kwangsoo, 2016. "Incubation and copying equity funds in China," Emerging Markets Review, Elsevier, vol. 28(C), pages 28-43.
    • Handle: RePEc:eee:ememar:v:28:y:2016:i:c:p:28-43
    DOI: 10.1016/j.ememar.2016.06.002
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    References listed on IDEAS

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    7. Frank, Mary Margaret & Poterba, James M & Shackelford, Douglas A & Shoven, John B, 2004. "Copycat Funds: Information Disclosure Regulation and the Returns to Active Management in the Mutual Fund Industry," Journal of Law and Economics, University of Chicago Press, vol. 47(2), pages 515-541, October.
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    9. Agarwal, Vikas & Mullally, Kevin & Tang, Yuehua & Yang, Baozhong, 2013. "Mandatory portfolio disclosure, stock liquidity, and mutual fund performance," CFR Working Papers 13-04, University of Cologne, Centre for Financial Research (CFR).
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    Cited by:

    1. Wang, Yaping & Paek, Miyoun & Ko, Kwangsoo, 2019. "The performance of Chinese equity funds: An extension of DGTW model," Japan and the World Economy, Elsevier, vol. 51(C), pages 1-1.
    2. Wang, Yaping & Ko, Kwangsoo, 2017. "Implications of fund manager turnover in China," International Review of Economics & Finance, Elsevier, vol. 51(C), pages 99-106.
    3. Qureshi, Fiza & Kutan, Ali M. & Ismail, Izlin & Gee, Chan Sok, 2017. "Mutual funds and stock market volatility: An empirical analysis of Asian emerging markets," Emerging Markets Review, Elsevier, vol. 31(C), pages 176-192.

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