Window dressing in mutual funds

  • Agarwal V
  • Gay G
  • Ling L
  • 96

    Readers

    Mendeley users who have this article in their library.
  • 12

    Citations

    Citations of this article.

Abstract

We provide a rationale for window dressing wherein investors respond to conflicting signals of managerial ability inferred from a fund's performance and disclosed portfolio holdings. We contend that window dressers make a risky bet on their performance during a reporting delay period, which affects investors' interpretation of the conflicting signals and hence their capital allocations. Conditional on good (bad) performance, window dressers benefit (suffer) from higher (lower) investor flows compared with non-window dressers. Window dressers also show poor past performance, possess little skill, and incur high portfolio turnover and trade costs, characteristics which in turn result in worse future performance.

Get free article suggestions today

Mendeley saves you time finding and organizing research

Sign up here
Already have an account ?Sign in

Find this document

Authors

Cite this document

Choose a citation style from the tabs below

Save time finding and organizing research with Mendeley

Sign up for free