The Telling Trades of Mutual Funds

Financial Management, Forthcoming

39 Pages Posted: 30 Jun 2004 Last revised: 6 May 2009

Date Written: March 1, 2008

Abstract

Under the assumption that mutual funds trade at quarter commencement, some funds exhibit and exploit persistent stock selection talent; i.e., the stocks purchased consistently outperform the stocks sold, and the higher turnover of these funds indicates that managers are capitalizing on their forecasting abilities. However, any evidence of sustained stock selection skill disappears when alternate trade-timing assumptions are considered, suggesting that some skilled managers are electing to trade earlier than previously assumed. Overall, my results question the appropriateness of the quarter end trading assumption and the validity of existing studies which employ it.

Keywords: Mutual funds, trading, persistence, investments

JEL Classification: G11, G14, G20

Suggested Citation

Nicolosi, Gina, The Telling Trades of Mutual Funds (March 1, 2008). Financial Management, Forthcoming, Available at SSRN: https://ssrn.com/abstract=560122 or http://dx.doi.org/10.2139/ssrn.560122

Gina Nicolosi (Contact Author)

Northern Illinois University ( email )

Department of Finance
Barsema Hall
DeKalb, IL 60115
United States
815-753-6391 (Phone)