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
Accepted author manuscript, 1.79 MB, PDF document
Available under license: CC BY-NC-ND: Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License
Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
}
TY - JOUR
T1 - Starting on the Wrong Foot
T2 - Seasonality in Mutual Fund Performance
AU - Brown, Stephen J.
AU - Sotes-Paladino, Juan
AU - Wang, Jiaguo
AU - Yao, Yaqiong
N1 - 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
PY - 2017/9
Y1 - 2017/9
N2 - 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.
AB - 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.
KW - Mutual funds
KW - Performance evaluation
KW - Seasonality
KW - Benchmark index
U2 - 10.1016/j.jbankfin.2017.05.013
DO - 10.1016/j.jbankfin.2017.05.013
M3 - Journal article
VL - 82
SP - 133
EP - 150
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
SN - 0378-4266
ER -