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Indirect tests of the Haugen‐Lakonishok small‐firm/January effect hypotheses: window dressing versus performance hedging
Author(s) -
Lee Chengfew,
Porter David C.,
Weaver Daniel G.
Publication year - 1998
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.1998.tb01376.x
Subject(s) - equity (law) , portfolio , economics , significant difference , monetary economics , financial economics , mathematics , statistics , political science , law
Equity mutual fund data from 1976–1993 is used to test hypotheses that distinguish window dressing from performance hedging. No significant difference is found pre/post 1983 in the number of funds choosing non‐December fiscal year ends or in the percentage of dollars invested when comparing December/non‐December fiscal year ends. Significant differences are found in both January returns for mutual funds with December/non‐December fiscal year ends and in one month returns for funds with/without a fiscal year end in the previous month. Therefore, if the small‐firm/January effect is portfolio manager related, performance hedging, not window dressing, is the more probable source for the “excess” returns.