Chinese Asset Managers' Monetary Policy Forecasts and Fund Performance.

This article focuses on analyzing Chinese monetary policy expectations by systematically applying textual analysis to quarterly reports of mutual fund managers in China. It constructs an aggregate index of fund managers’ near-term monetary policy forecasts, which demonstrates superior predictive power compared to market- and model-based alternatives, such as the Taylor rule and implied forward rates. The study finds that fund managers act consistently with their forecasts, and correct anticipation of monetary policy shifts is associated with improved performance and greater fund inflows, particularly for money market and bond funds. Additionally, forecast accuracy is higher among managers of larger funds, those charging higher management fees, managers with Ph.D. degrees, and those based in Beijing, suggesting that informational resources and proximity to policymakers enhance forecasting skill. The paper also highlights the impact of China’s 2013 interest rate liberalization on the relationship between forecast skill and fund performance.