Starting on the Wrong Foot: Seasonality in Mutual Fund Performance

Stephen J Brown; Juan Sotes-Paladino; Chelsea Yao; George Wang

Starting on the Wrong Foot: Seasonality in Mutual Fund Performance

Stephen J Brown, Juan Sotes-Paladino, Chelsea Yao, George Wang

A&F Accounting & Finance

Research output: Contribution to conference › Paper › peer-review

Abstract

We document a marked seasonal pattern in the aggregate underperformance of active mutual funds. On average, a value-weighted portfolio of active funds underperforms the market and other benchmark portfolios in the first month of a quarter only. This intra-quarter pattern remains significant across fund size and investment style categories. It is partially consistent with tournament-like behavior (quarter-end NAV inflation and window dressing) by mutual funds, but bears limited to no relation with systematic time variation in microstructure biases, investors’ flows or cash distributions. Our results pose a challenge to existing explanations of the mutual funds’ underperformance puzzle.

Original language	English
Publication status	Published - 2016
Event	Asian FA Annual Meeting - Anantara Siam Bangkok Hotel, Bangkok, Thailand Duration: 26 Jun 2016 → 28 Jun 2016 Conference number: 28

Conference

Conference	Asian FA Annual Meeting
Country/Territory	Thailand
City	Bangkok
Period	26/06/16 → 28/06/16

Keywords

Mutual funds, seasonality, performance evaluation, benchmark index

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http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2641690

Cite this

@conference{28be9cba728f47f48988803619fd5eb7,

title = "Starting on the Wrong Foot: Seasonality in Mutual Fund Performance",

abstract = "We document a marked seasonal pattern in the aggregate underperformance of active mutual funds. On average, a value-weighted portfolio of active funds underperforms the market and other benchmark portfolios in the first month of a quarter only. This intra-quarter pattern remains significant across fund size and investment style categories. It is partially consistent with tournament-like behavior (quarter-end NAV inflation and window dressing) by mutual funds, but bears limited to no relation with systematic time variation in microstructure biases, investors{\textquoteright} flows or cash distributions. Our results pose a challenge to existing explanations of the mutual funds{\textquoteright} underperformance puzzle.",

keywords = "Mutual funds, seasonality, performance evaluation, benchmark index",

author = "Brown, {Stephen J} and Juan Sotes-Paladino and Chelsea Yao and George Wang",

note = "FMA 2016 Annual Meeting Paper, Asian Finance Association 2016 Annual Meeting Paper; Asian FA Annual Meeting ; Conference date: 26-06-2016 Through 28-06-2016",

year = "2016",

language = "English",

}

TY - CONF

T1 - Starting on the Wrong Foot

T2 - Asian FA Annual Meeting

AU - Brown, Stephen J

AU - Sotes-Paladino, Juan

AU - Yao, Chelsea

AU - Wang, George

N1 - Conference code: 28

PY - 2016

Y1 - 2016

N2 - We document a marked seasonal pattern in the aggregate underperformance of active mutual funds. On average, a value-weighted portfolio of active funds underperforms the market and other benchmark portfolios in the first month of a quarter only. This intra-quarter pattern remains significant across fund size and investment style categories. It is partially consistent with tournament-like behavior (quarter-end NAV inflation and window dressing) by mutual funds, but bears limited to no relation with systematic time variation in microstructure biases, investors’ flows or cash distributions. Our results pose a challenge to existing explanations of the mutual funds’ underperformance puzzle.

AB - We document a marked seasonal pattern in the aggregate underperformance of active mutual funds. On average, a value-weighted portfolio of active funds underperforms the market and other benchmark portfolios in the first month of a quarter only. This intra-quarter pattern remains significant across fund size and investment style categories. It is partially consistent with tournament-like behavior (quarter-end NAV inflation and window dressing) by mutual funds, but bears limited to no relation with systematic time variation in microstructure biases, investors’ flows or cash distributions. Our results pose a challenge to existing explanations of the mutual funds’ underperformance puzzle.

KW - Mutual funds, seasonality, performance evaluation, benchmark index

M3 - Paper

Y2 - 26 June 2016 through 28 June 2016

ER -

Starting on the Wrong Foot: Seasonality in Mutual Fund Performance

Abstract

Conference

Keywords

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