Window dressing in mutual funds

Arbeitspapier

We provide a rationale for window dressing where investors respond to conflicting signals of managerial ability inferred from a fund's performance and disclosed portfolio holdings. We contend that window dressers take 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 from higher (lower) investor flows as compared to non-window dressers. Window dressers also have poor past performance, possess little skill, and incur high portfolio turnover and trade costs, characteristics which in turn result in worse future performance.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CFR Working Paper ; No. 11-07 [rev.3]

Classification and Topics

• Classification: Wirtschaft ; Portfolio Choice; Investment Decisions ; Financial Institutions and Services: General
• Subject: Mutual funds ; Window dressing ; Portfolio disclosure ; Fund flows

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Agarwal, Vikas ; Gay, Gerald D. ; Ling, Leng
• Event: Veröffentlichung
• (who): University of Cologne, Centre for Financial Research (CFR)
• (where): Cologne
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/97693
• Last update: 10.03.2025, 11:43 AM CET