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Finance & Accounting Group Seminar

When Nov 15, 2011
from 10:30 AM to 12:00 PM
Where Room W2.02, CJBS
Contact Name
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Professor Vikas Agarwal – Georgia State University Mark Robinson College of Business

Paper: Window Dressing in Mutual Funds


This paper introduces two measures to investigate potential window-dressing behaviour among mutual fund managers. We show that unskilled managers that perform poorly are more likely to window dress by strategically buying winner stocks and selling loser stocks near quarter ends. Further, funds with higher expense ratios and greater portfolio turnover are associated with more window dressing. We also find that funds involved in window dressing perform poorly in the following quarter. Given these adverse effects, we demonstrate how window dressing can exist in equilibrium. Current reporting requirements allow managers up to 60 days’ delay to report end of quarter portfolio holdings. We show how window-dressing managers can benefit from incrementally higher fund flows if good performance is realized during the delay period. However, we find that poor performance results in incrementally lower flows than that observed for non-window dressing managers.

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