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Visible Hands: Professional Asset Managers’ Expectations and the Stock Market in China

Published online by Cambridge University Press:  07 April 2025

John Ammer ,
John Rogers ,
Gang Wang  and
Yang Yu Open the ORCID record for Yang Yu [Opens in a new window]
John Ammer
Affiliation:
Federal Reserve Board, International Finance Division [email protected]
John Rogers
Affiliation:
Fudan University, Fudan International School of Finance [email protected]
Gang Wang
Affiliation:
Shanghai University of Finance and Economics, Institute of Accounting and Finance, School of Accountancy [email protected]
Yang Yu*
Affiliation:
Shanghai Jiao Tong University, Antai College of Economics and Management, Department of Economics
*
[email protected] (corresponding author)
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Abstract

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We study how professional fund managers’ growth expectations affect their equity investments and the consequent 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 statistically significant link between managers’ growth expectations and returns on the stocks that they hold and trade. We also find that an earnings-based measure of price informativeness is increasing in forecasting managers’ investment and forecast-consistent trading, implying that active fund managers in China help move stock prices closer to underlying fundamentals.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , First View , pp. 1 - 31
Creative Commons
Creative Common License - CCCreative Common License - BY
This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0), which permits unrestricted re-use, distribution and reproduction, provided the original article is properly cited.
Copyright
© The Author(s), 2025. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

Footnotes

We thank the two anonymous referees and Stephan Siegel (the editor) for their valuable comments. We also thank Daniel Beltran, David Jenkins, Emilio Osambela, Ken Teoh, Jun Tu, and workshop participants at the Federal Reserve Board for their constructive feedback. The views in this article are solely the responsibility of the authors and should not be interpreted as reflecting the views of the Board of Governors of the Federal Reserve System or any other person associated with the Federal Reserve System.

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