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Do Enhanced Index Funds Truly Have Enhanced Performance? Evidence from the Chinese Market

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  • Yin-Che Weng
  • Rui Wang

Abstract

The index fund market has grown dramatically in China, particularly for active index funds known as enhanced index funds (EIFs). This article is the first to thoroughly exam the performance of EIFs in the Chinese market. Our analysis shows that EIFs in China perform worse than their benchmarks. We note that EIF managers are good market timers when the market does not move significantly. The underperformance of EIFs is primarily attributed to a fund manager’s stock-picking ability; former managing experience is also a factor. Our results suggest that passive index funds are better choices than active funds for fund investments in the Chinese market.

Suggested Citation

  • Yin-Che Weng & Rui Wang, 2017. "Do Enhanced Index Funds Truly Have Enhanced Performance? Evidence from the Chinese Market," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 53(4), pages 819-834, April.
    • Handle: RePEc:mes:emfitr:v:53:y:2017:i:4:p:819-834
    DOI: 10.1080/1540496X.2015.1105637
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    Cited by:

    1. Fiza Qureshi & Ali M. Kutan & Habib Hussain Khan & Saba Qureshi, 2019. "Equity fund flows, market returns, and market risk: evidence from China," Risk Management, Palgrave Macmillan, vol. 21(1), pages 48-71, March.
    2. Gianfranco Guastaroba & Renata Mansini & Wlodzimierz Ogryczak & M. Grazia Speranza, 2020. "Enhanced index tracking with CVaR-based ratio measures," Annals of Operations Research, Springer, vol. 292(2), pages 883-931, September.
    3. Patrizia Beraldi & Maria Elena Bruni, 2022. "Enhanced indexation via chance constraints," Operational Research, Springer, vol. 22(2), pages 1553-1573, April.

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