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.
|Number of pages||18|
|Journal||Journal of Banking and Finance|
|State||Published - Sep 2017|
Bibliographical notePublisher Copyright:
© 2017 Elsevier B.V.
- Benchmark index
- Mutual funds
- Performance evaluation