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Seasonality, Market Timing and Performance Amongst Benchmarks and Mutual Fund Evaluation
Author(s) -
MatallínSáez Juan C.
Publication year - 2006
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.2006.00636.x
Subject(s) - seasonality , mutual fund , closed end fund , investment management , econometrics , economics , manager of managers fund , passive management , context (archaeology) , stock (firearms) , style analysis , open end fund , investment strategy , financial economics , business , actuarial science , institutional investor , monetary economics , finance , statistics , corporate governance , mathematics , geography , archaeology , market liquidity
Mutual fund performance is normally measured by comparing results of active management with those obtained by one or several benchmarks that should represent the fund's investment. In this context, this paper examines the effect on mutual fund assessment if a relevant benchmark is omitted. This effect is analysed in three elements of active management: stock selection, market timing, and seasonality. The latter is defined as fund management at specific moments of time with the objective of achieving positive abnormal returns to improve performance. For a sample of Spanish mutual funds, we find that the omission of style benchmarks, particularly that corresponding to small‐cap stocks, leads to greater evidence of negative market timing and positive seasonality at year beginning. However, the positive abnormal returns of the seasonality at year end, month end and especially at the beginning of July hold regardless of benchmark omission. The paper therefore also analyses the relation between performance and seasonality, finding that positive seasonality at year beginning and at July beginning improves performance; however, at other moments it implies a possible window dressing strategy in mutual fund management.