The Effect of the Frequency of Holdings Data on Conclusions About Mutual Fund Management Behavior

39 Pages Posted: 3 Aug 2006 Last revised: 7 Apr 2010

See all articles by Edwin J. Elton

Edwin J. Elton

New York University (NYU) - Department of Finance

Martin J. Gruber

New York University (NYU) - Department of Finance

Christopher R. Blake

Fordham University - Gabelli School of Business

Yoel Krasny

New York University (NYU) - Leonard N. Stern School of Business

Sadi Ozelge

New York University (NYU) - Leonard N. Stern School of Business

Date Written: June 29, 2009

Abstract

A number of articles in financial economics have used quarterly or semi-annual mutual fund holdings data to test hypotheses about investment manager behavior. This article reexamines four well-known hypotheses in finance to determine whether the results of prior tests of these hypotheses remain valid when higher frequency (monthly) holdings data are employed. The areas examined are: momentum trading, tax-motivated trading, window dressing, and tournament behavior. We find that the use of monthly holdings data rather than quarterly holdings data or, in the case of tournament behavior, holdings data rather than monthly return data, change, and in some cases reverse, previous results. This occurs because monthly holdings data capture a large number of trades missed by quarterly data (18.5% of the trades) and permit a more precise estimation of the timing of trades.

Keywords: mutual funds, holdings, momentum, tournament, window dressing, tax effects

JEL Classification: G11, G23, H22

Suggested Citation

Elton, Edwin J. and Gruber, Martin J. and Blake, Christopher R. and Krasny, Yoel and Ozelge, Sadi, The Effect of the Frequency of Holdings Data on Conclusions About Mutual Fund Management Behavior (June 29, 2009). Bloomberg Portfolio Research Paper No. 2010-04-FRONTIERS. Available at SSRN: https://ssrn.com/abstract=920840 or http://dx.doi.org/10.2139/ssrn.920840

Edwin J. Elton (Contact Author)

New York University (NYU) - Department of Finance ( email )

44 West 4th Street
Ste 9-190
New York, NY 10012-1126
United States
212-998-0361 (Phone)
212-995-4233 (Fax)

Martin J. Gruber

New York University (NYU) - Department of Finance ( email )

44 West 4th Street
Ste 9-190
New York, NY 10012-1126
United States
212-998-0333 (Phone)
212-995-4233 (Fax)

Christopher R. Blake

Fordham University - Gabelli School of Business ( email )

113 West 60th Street
Lowenstein Building
New York, NY 10023
United States
212-636-6750 (Phone)

Yoel Krasny

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

Sadi Ozelge

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

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