Detecting window dressing: An empirical study on the Philippine equity mutual fund using return gap and GARCH model

Date of Publication


Document Type

Bachelor's Thesis

Degree Name

Bachelor of Science in Management of Financial Institutions


Ramon V. Del Rosario College of Business


Financial Management Department

Thesis Adviser

Liberty Patiu

Defense Panel Chair

Frederick Romero

Defense Panel Member

Rene Betita

Alfredo Santoyo


A number of studies have already been conducted in other countries that have verified the existence of window dressing which posits a conflict of interest between the shareholders and the investors who are often deluded into thinking that the fund has been performing well which might probably turn out to be the opposite. However, despite this widespread existence, such activity which cannot be noticed at a glance has not been confirmed in the Philippine mutual fund industry. Thus, this paper examines the portfolio holdings, selected financial variables and mutual fund prices of the 6 selected equity funds in order to detect the presence of window dressing in the Philippines and to further identify if there are any factors that would serve as indicators to the investors to avoid being deceived by the performance of the fund managers. Using the return gap, OLS and GARCH model, the empirical result suggests that window dressing is being practiced in the local fund industry but is not as prevalent as it is in the U.S. It also reveals that the total assets, expense ratio, fund age and flow flows are not related to window dressing and do not influence the change in the proxy variable 'return gap' except for Company D (return gap and fund flows). Meanwhile, in assessing the NAVPS of the fund depicts that the volatility of the fund's return does not necessarily convey a by-product of window dressing, but instead, market news and errors in valuation, redemption and subscription might have played a factor to the sudden change in the prices. Hence, scrutinizing the financial statements or simply looking at the prices of the fund does not provide a strong evidence to capture the behavior of window dressing.

Abstract Format






Accession Number


Shelf Location

Archives, The Learning Commons, 12F, Henry Sy Sr. Hall

Physical Description

460, 4 leaves : illustrations (some color) ; 28 cm. + 1 computer disc ; 4 3/4 in.


Mutual funds--Philippines

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