A new measure of fund window dressing and its application to Chinese mutual fund market

Xiaojian Yu, Jianlin Liu and Donald Lien

The Quarterly Review of Economics and Finance, 2023, vol. 89, issue C, 63-72

Abstract: In this paper, we propose a new window dressing index, Simulation Return Rank Gap, and show it improves over the two popular fund window dressing indexes, Backward Holding Return Gap and Rank Gap. First, we conduct a simulation analysis to confirm the dominance of the new index. Next, we use the Chinese market data to compare the three indexes empirically. We find all three indexes confirm the existence of window dressing in the Chinese fund market. The new index maintains a high consistency ratio and a large Spearman correlation coefficient with other indexes. It also has a smaller probability of misidentifying the window dressing funds. The results support the new index as a superior alternative to the current method.

Keywords: Fund window dressing index; Backward Holding Return Gap; Rank Gap; China (search for similar items in EconPapers)
JEL-codes: D82 G10 G11 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:89:y:2023:i:c:p:63-72

DOI: 10.1016/j.qref.2023.03.001

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