Since the market timing theory was clearly proposed by Baker and Murgler in 2002,the explaining power of the traditional capital structure theories has been doubted and many disputes over this new capital structure theory have also come out.

Due to the long-existing valuation difference between Chinese domestic market and overseas market,it is natural that Chinese overseas-listed companies have a strong market timing motivation when attempting to return for dual listing.

Market timing that based on behavioral finance theory give up the Efficient Market Hypothesis and study the capital structure from the investor point of view of non-rational.

This paper constituted a new sort of T-M model and H-M model,and found out that fund manager adjustment does not improve securities selection and market timing of funds in Chinese stock market.

In this paper, we analyze open-end funds selectivity and market timing ability under volatility clustering , through adding GARCH(Generalized Auto-Regressive Conditional Heteroskedastic) model to T-M (Treynor and Mazuy) and H-M(Henriksson and Merton) models ,using the weekly returns of 15 open funds established before 2003.

We used several indicators such as compound return on net value, geometrical yield, sharp ratio, M2 value to evaluate the performance of the sample products, and also took an empirical study for the stock selection and market timing.

The Research on the Market Timing Ability of Chinese Mutual Funds;

Our paper tests recent market timing ability and security selection ability of open-end mutual funds in China.