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The Economist: Mutton dressed as lamb


Like celebrities using plastic surgery or Botox, a study co-authored by Professor Raghavendra Rau of Cambridge Judge Business School finds that mutual fund managers use tricks to make their returns look more attractive. Mutual fund managers aggressively advertise funds whose performance is looking deceptively good due to “stale returns” dropping off the back end of a reporting period, as investors can’t tell the difference between stale returns dropping off and good returns being added on.

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