Journal article

Starting on the wrong foot: Seasonality in mutual fund performance

SJ Brown, J Sotes-Paladino, J Wang, Y Yao

Journal of Banking & Finance | Elsevier | Published : 2017


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 micros tructure biases, fund investor flows, or cash distributions as sources of this seasonality. Our findings highlight new features of the active management underp..

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University of Melbourne Researchers


Funding Acknowledgements

We thank Torben Andersen, Tze Chuan Ang (AsianFA discussant), Jonathan Berk, Michael Brennan, John Campbell, Wayne Ferson, Bruce Grundy, Vasso loannidou, Narasimhan Jegadeesh, Byoung Uk Kang (FMA discussant), Simi Kedia, Robert Korajczyk, Robert Kosowski, Peter Kyle, Spencer Martin, Federico Nardari, Thomas Ruf (AFBC discussant), Johan Sulaeman (SFM discussant), Russ Wermers, Mungo Wilson, an associate editor, an anonymous referee, and seminar participants at Capital University of Economics and Business, Lund University, Melbourne University, Zhongnan University of Economics and Law, the Asian Finance Association 2016 Annual Meeting, the Financial Management Association 2016 Annual Meeting, the 24th Conference on the Theories and Practices of Securities and Financial Markets, the 29th Australasian Finance and Banking Conference, for their helpful comments. Part of the paper was completed while Jiaguo (George) Wang and Yaqiong Yao were visiting New York University's Stern School of Business in 2012 and 2015. Yaqiong Yao acknowledges financial supports from Lancaster University Management School for visiting NYU Stern in 2015.