  We analyze actively managed mutual funds in China from 2005 to 2017. We
develop performance measures for asset allocation and selection. We find that
stock selection ability from holding-based model is positively correlated with
selection ability estimated from Fama-French three-factor model, which is
price-based regression model. We also find that industry allocation from
holding-based model is positively correlated with timing ability estimated from
price-based Treynor-Mazuy model most of the time. We conclude that most
actively managed funds have positive stock selection ability but not asset
allocation ability, which is due to the difficulty in predicting policy
changes.
