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    Rights statement: 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

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Starting on the Wrong Foot: Seasonality in Mutual Fund Performance

Research output: Contribution to journalJournal article

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<mark>Journal publication date</mark>09/2017
<mark>Journal</mark>Journal of Banking and Finance
Volume82
Number of pages18
Pages (from-to)133-150
Publication statusPublished
Early online date7/06/17
Original languageEnglish

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.

Bibliographic note

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