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The effect of holdings data frequency on conclusions about mutual fund behavior

In: Investments And Portfolio Performance

Author

Listed:
  • Edwin J. Elton

    (Nomura Professor of Finance, Stern School of Business, New York University, United States)

  • Martin J. Gruber

    (Nomura Professor of Finance, Stern School of Business, New York University, United States)

  • Christopher R. Blake

    (Joseph Kearing, S.J., Distinguished Professor, Fordham University, United States)

  • Yoel Krasny

    (Stern school of Business, New York University, United States)

  • Sadi O. Ozelge

    (Bloomberg L.P., New York, United States)

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.

Suggested Citation

  • Edwin J. Elton & Martin J. Gruber & Christopher R. Blake & Yoel Krasny & Sadi O. Ozelge, 2010. "The effect of holdings data frequency on conclusions about mutual fund behavior," World Scientific Book Chapters, in: Edwin J Elton & Martin J Gruber (ed.), Investments And Portfolio Performance, chapter 10, pages 195-205, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814335409_0010
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    Citations

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    Cited by:

    1. Muñoz, Fernando & Ortiz, Cristina & Vicente, Luis, 2022. "Ethical window dressing: SRI funds are as good as their word," Finance Research Letters, Elsevier, vol. 49(C).
    2. Carneiro, Livia Mendes & Eid Junior, William & Yoshinaga, Claudia Emiko, 2022. "The implications of passive investments for active fund management: International evidence," Global Finance Journal, Elsevier, vol. 53(C).
    3. Beatrice Boumda & Darren Duxbury & Cristina Ortiz & Luis Vicente, 2021. "Do Socially Responsible Investment Funds Sell Losses and Ride Gains? The Disposition Effect in SRI Funds," Sustainability, MDPI, vol. 13(15), pages 1-14, July.

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