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Indirect Tests of the Haugen-Lakonishok Small-Firm/January Effect Hypotheses: Window Dressing versus Performance Hedging

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  • Lee, Cheng-few
  • Porter, David C
  • Weaver, Daniel G

Abstract

Equity mutual fund data from 1976-93 is used to test hypotheses that distinguish window dressing from performance hedging. No significant difference is found pre/post 1983 in the number of funds choosing non-December fiscal year ends or in the percentage of dollars invested when comparing December/non-December fiscal year ends. Significant differences are found in both January returns for mutual funds with December/non-December fiscal year ends and in one month returns for funds with/without a fiscal year end in the previous month. Therefore, if the small-firm/January effect is portfolio manager related, performance hedging, not window dressing, is the more probable source for the "excess" returns. Copyright 1998 by MIT Press.

Suggested Citation

  • Lee, Cheng-few & Porter, David C & Weaver, Daniel G, 1998. "Indirect Tests of the Haugen-Lakonishok Small-Firm/January Effect Hypotheses: Window Dressing versus Performance Hedging," The Financial Review, Eastern Finance Association, vol. 33(2), pages 177-193, May.
    • Handle: RePEc:bla:finrev:v:33:y:1998:i:2:p:177-93
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    Cited by:

    1. Ortiz, Cristina & Sarto, José Luis & Vicente, Luis, 2012. "Portfolios in disguise? Window dressing in bond fund holdings," Journal of Banking & Finance, Elsevier, vol. 36(2), pages 418-427.
    2. Luis Ferruz & Luis Vicente & Laura Andreu, 2009. "Performance persistence and its influence on money and investor flows into Spanish pension plans," Review of Quantitative Finance and Accounting, Springer, vol. 32(1), pages 85-100, January.
    3. Cristina Ortiz & Gloria Ramírez & Luis Vicente, 2015. "Mutual Fund Trading and Portfolio Disclosures," Journal of Financial Services Research, Springer;Western Finance Association, vol. 48(1), pages 83-102, August.
    4. Alexandra Maria SERBU & Theodor Gabriel TRIFAN, 2024. "Drifting away from market efficiency: the presence of the January effect in the U.S. stock market," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(1(638), S), pages 95-104, Spring.

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