1. Yeguang Chi
1. is a lecturer at the University of Auckland Graduate School of Management in Auckland, New Zealand. (y.chi{at}auckland.ac.nz)
2. Yu Liu
1. is a PhD student at Dongbei University of Finance and Economics, School of Accounting in Dalian, China. (ariel2008liuyu{at}hotmail.com)
3. Xiao Qiao
1. is an assistant professor at City University of Hong Kong and a member of the Hong Kong Institute for Data Science in Hong Kong, China. (xiaoqiao{at}cityu.edu.hk)
Actively managed stock mutual funds in the Chinese A-share market offer good investment opportunities. In aggregate, they outperform stock market indexes. Individual funds show a wide cross-sectional dispersion in performance, with the best funds offering economically large risk-adjusted returns that persist over time. Performance persistence observed at the individual fund level is robust to various factor-model specifications. A portfolio of the top-performing funds offers an improved investment opportunity compared to a portfolio of all funds. Hedging out market risk in this portfolio increases the Sharpe ratio, lowers volatility, and reduces tail risk. These results suggest that, in the young and still-developing Chinese A-share market, mutual funds can add value for investors.