Starting on the Wrong Foot:Seasonality in Mutual Fund Performance

Brown, Stephen J. and Sotes-Paladino, Juan and Wang, Jiaguo and Yao, Yaqiong (2017) Starting on the Wrong Foot:Seasonality in Mutual Fund Performance. Journal of Banking and Finance, 82. pp. 133-150. ISSN 0378-4266

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Abstract

We document a systematic seasonal component in the aggregate underperformance of active mutual funds. At the aggregate level, active funds underperform the market and other passive benchmarks only in the first month of a quarter. This intra-quarter performance seasonality holds across fund sizes and investment styles. The pattern is consistent with short-term stock return reversal effects along with aggregate window-dressing and, to a lesser extent, NAV-inflation practices around quarter-ends. We find marginal or no evidence of microstructure biases, fund investor flows, or cash distributions as sources of this seasonality. Our findings highlight new features of the active management underperformance puzzle.

Item Type:
Journal Article
Journal or Publication Title:
Journal of Banking and Finance
Additional Information:
This is the author’s version of a work that was accepted for publication in Journal of Banking and Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Banking and Finance, 82, 2017 DOI: 10.1016/j.jbankfin.2017.05.013
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/2000/2002
Subjects:
ID Code:
86650
Deposited By:
Deposited On:
09 Jun 2017 11:04
Refereed?:
Yes
Published?:
Published
Last Modified:
29 Feb 2020 05:22