Seasonality and Idiosyncratic Risk in Mutual Fund Performance

European Journal of Operational Research 233 (2014), pp. 613-624

34 Pages Posted: 6 Feb 2012 Last revised: 19 Nov 2014

See all articles by Javier Vidal-García

Javier Vidal-García

Harvard University; Complutense University Madrid

Marta Vidal

Universidad Europea de Madrid; Universidad Complutense de Madrid (UCM)

Date Written: June 1, 2013


This paper examines the relationship between seasonality, idiosyncratic risk and mutual fund returns using multifactor models. We use a large sample containing the return histories of 728 UK mutual funds over a 23-year period to measure fund performance. We present evidence that idiosyncratic risk cannot be eliminated, we also find evidence of seasonality in all fund categories. Specifically, we find a close relation between the seasonality and the end of the tax-year. We document that the idiosyncratic risk puzzle cannot explain seasonality in fund performance in the UK. Although, we do find that idiosyncratic risk can account for the seasonality in the month of April. Thus, the results show a link between the taxloss selling hypothesis in April and idiosyncratic risk in that month. Finally, we report evidence that idiosyncratic risk is negatively related to expected returns for most fund classes.

Keywords: Mutual fund performance, seasonality, idiosyncratic risk, tax-loss selling

JEL Classification: G11, G12, G14

Suggested Citation

Vidal-García, Javier and Vidal, Marta, Seasonality and Idiosyncratic Risk in Mutual Fund Performance (June 1, 2013). European Journal of Operational Research 233 (2014), pp. 613-624. Available at SSRN: or

Javier Vidal-García (Contact Author)

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

Complutense University Madrid ( email )

School of Business Administration
Somosaguas Campus
Madrid, Madrid 28223

Marta Vidal

Universidad Europea de Madrid ( email )

Villaviciosa de Odón
Madrid, 28670

Universidad Complutense de Madrid (UCM) ( email )

Somosaguas Campus
Madrid, 28223

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