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Starting on the Wrong Foot: Seasonality in Mutual Fund Performance

Research output: Contribution to conference - Without ISBN/ISSN Conference paper

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Publication date06/2016
Original languageEnglish
EventThe 28th Asian FA Annual Meeting 2016 - Anantara Siam Bangkok Hotel, Bangkok, Thailand
Duration: 26/06/201628/06/2016
https://www.set.or.th/asianfa2016/index.html

Conference

ConferenceThe 28th Asian FA Annual Meeting 2016
CountryThailand
CityBangkok
Period26/06/1628/06/16
Internet address

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.