Title: Structured Beliefs in Fund Managers’ Own Words: Fundamentals, Policy, and Sentiment
Speaker: Professor Zhenyu Gao (CUHK Business School, Chinese University of Hong Kong)
Date: Wednesday, April 8, 2026
Time: 4:30 PM - 5:50 PM
Venue: 90402 International Hall

Abstract:
Using mandatory Outlook reports from Chinese mutual funds, we extract each fund’s beliefs about the equity market and decompose them into three components: beliefs about macroeconomic fundamentals, beliefs about government policy, and a residual that captures fund sentiment. We find that policy beliefs—not macro fundamentals—significantly predict subsequent market returns, helping explain the positive alphas observed in the Chinese mutual fund industry. At the same time, funds strategically incorporate a sentiment component that exerts the strongest influence on equity allocations. Fund sentiment predicts future fund flows, but not market returns, consistent with an incentive to attract flows.