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Seasonality in Fund Performance: An Examination of the Portfolio Holdings and Trades of Investment Managers

Authors

  • David R. Gallagher,

    1. The authors are respectively from the School of Banking and Finance, The University of New South Wales, Sydney, Australia; and the Department of Accounting, The University of Melbourne, Australia. Matt Pinnuck thanks Frank Russell Company and the Investment and Financial Services Associations (formerly Australian Investment Managers Association) for the provision of portfolio holdings data employed in the study.
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  • Matt Pinnuck

    Corresponding author
    1. The authors are respectively from the School of Banking and Finance, The University of New South Wales, Sydney, Australia; and the Department of Accounting, The University of Melbourne, Australia. Matt Pinnuck thanks Frank Russell Company and the Investment and Financial Services Associations (formerly Australian Investment Managers Association) for the provision of portfolio holdings data employed in the study.
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  • The authors thank an anonymous referee, Simone Brands, Stephen Brown, Philip Brown, Neil Fargher, and seminar participants at University of Technology, Sydney, and Monash University for helpful comments. They also acknowledge SIRCA for the provision of ASX Signal G SEATS data.

* Address for correspondence: Matt Pinnuck, University of Melbourne, Parkville, 3010, Australia. e-mail: mpinnuck@unimelb.edu.au

Abstract

Abstract:  This study examines the extent to which seasonal variation arises across calendar months in the performance of active Australian equity managers. While it is well documented that there is seasonality in equity market returns, it is unknown whether calendar month variation in managed fund performance exists. Employing a unique database of monthly stock holdings, we find evidence consistent with systematic variation in the risk-adjusted performance of active investment managers over the calendar year. Specifically, we find fund performance is higher in the months when corporate earnings are announced. We also document that the performance of fund managers is lower in the months preceding the tax year-end. Finally, we report evidence that investment manager performance is greater than normal in December, possibly due to both window dressing and the Christmas holiday effect. These findings have important implications for investors attempting to exploit anomalies in fund returns by timing their entry and exit points from active equity funds.

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