Mutual Fund Trading and Portfolio Disclosures
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This is the first study in a large European market which analyzes monthly portfolios to obtain evidence of equity fund trading around quarterly reports. A new portfolio-weight approach shows that managers disclose large-cap and well-known stocks with higher returns and hide the same return-loser stocks in the reporting months. A fund-size agency problem plays an important role in this window dressing evidence. Fund trading also shows that managers benefits from the January effect by buying small-cap stocks at the beginning of the year rather than causing this anomaly.
KeywordsMutual funds Window dressing January effect Agency problem Intra-quarter trading
JEL ClassificationG11 G12 G23
The authors thank the UCEIF Foundation, research project ECO2009-12819-C03-02 of the Spanish Department of Science, and research project 268–159 of the University of Zaragoza for their financial support. We appreciate insightful comments from David Musto (editor) and the anonymous referee, Manuel Armada, Alexander Kempf, Van Thi Tuong Nguyen, Auke Plantinga, José Luis Sarto, and the participants of the EFMA 2011 annual meeting. Any possible errors in this article are the exclusive responsibility of the authors.
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