Trading activity near the end of a quarter or fiscal year that is designed to improve the appearance of a portfolio to be presented to clients or shareholders. For example, a portfolio manager may sell losing positions so as to display only positions that have gained in value. Financial institutions have also been criticized for a different type of window dressing as many moved debt off the balance sheet near the end of the quarter in a temporary manner. This made the bank appear to have less leverage than it actually did.
Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University