Exploring Fund Management Efficacy and Investor Behaviour in the Chinese Market: An Empirical Insight into Security Selection, Market Timing, and Cognitive Biases

Abstract

This manuscript seeks to examine the impact of various factors—including active security selection, market timing ability, and the ownership structures of traditional equity and bond funds—on fund management effectiveness and investor behaviour within the Chinese fund market. Additionally, it explores the influence of cognitive biases on these dynamics. Through a systematic review of the extant literature and hypothetical data analysis, this study elucidates the diverse strategies that account for superior fund performance and highlights the risks associated with selecting funds solely based on historical performance data. Based on the formulated hypotheses, it can be concluded that active management, tailored bond fund models, and the acknowledgment of cognitive biases significantly influence both the success of funds and investor decisionmaking. This research contributes to the financial literature by bridging theoretical predictions with empirical findings. It also offers recommendations that could be valuable for guiding future empirical research, shaping policy, and informing investment practices in fund management.