International Finance Discussion Papers (IFDP)
December 2022
Visible Hands: Professional Asset Managers' Expectations and the Stock Market in China
John Ammer, John Rogers, Gang Wang, and Yang Yu
Abstract:
We study how professional fund managers' growth expectations affect the actions they take with respect to equity investment and in turn the effects on prices. Using novel data on China's mutual fund managers' growth expectations, we show that pessimistic managers decrease equity allocations and shift away from more-cyclical stocks. We identify a strong short-run causal effect of growth expectations on stock returns, despite statistically significant delays in price discovery from short-sale constraints. Finally, we find that an earnings-based measure of price informativeness is increasing in fund investment.
DOI: https://doi.org/10.17016/IFDP.2022.1362
PDF: Full Paper
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