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A recent study, Fund Performance Driven by ChatGPT: Evidence from the Chinese Fund Market, examines the impact of ChatGPT-related news on China’s fund market despite the model’s unavailability in the country. The research investigates how financial news mentioning ChatGPT influences fund inflows, excess returns, and Sharpe ratios in China’s equity fund sector.

Methodology

Data Collection:

• Analyzed Chinese equity fund data from September 1, 2022, to February 16, 2023.

Identifying ChatGPT-Related Funds:

• Defined ChatGPT-related funds as those holding at least one ChatGPT-concept stock.

Difference-in-Differences (DID) Regression:

• Compared Sharpe ratios and excess returns before and after ChatGPT’s launch between:

  • Treatment group (ChatGPT-related funds)

  • Control group (other public funds)

Mechanism Analysis:

• Assessed whether fund inflows and ChatGPT-concept stock performance were key drivers of fund outperformance.

Heterogeneity Analysis:

• Examined differences in fund reactions based on:

  • Ownership structure (state-owned, foreign, private)

  • Investment style (growth, balanced, value funds)

Key Findings

1. ChatGPT-Related Funds Outperformed Post-Launch

• Following ChatGPT’s release, ChatGPT-related funds saw significant improvements in both Sharpe ratios and excess returns.

• Investor enthusiasm for AI and technology themes fueled this performance.

2. Fund Inflows & Concept Stock Effect

The positive market reaction was driven by:

• Increased fund inflows into ChatGPT-related funds.

• Surging excess returns of ChatGPT-concept stocks, reinforcing the thematic investment trend.

3. Ownership Structure Differences

• State-owned enterprise (SOE) funds showed the strongest reaction to ChatGPT news.

• Foreign-owned (FOE) and private equity (PE) funds responded less aggressively.

4. Investment Style Variations

• Growth and balanced funds benefited from ChatGPT news, while value funds showed little impact.

• This suggests that technology-driven thematic investing appeals more to growth-oriented strategies.

Despite ChatGPT being unavailable in China, news surrounding its development boosted investor sentiment and fund performance in the Chinese market. This highlights how thematic investing and AI-driven narratives influence fund inflows and stock price movements, even in markets with restricted AI access.

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