Accounting that allows for settlement of mutual fund trades one day past the trade, or T+1, uses stale portfolio valuations, leading to variations between funds' reported net asset values (NAVs) and their true worth, a new study warns investors.

The study, "Live Prices And Stale Quantities: T+1 Accounting and Mutual Fund Mispricing," was conducted by Ryan Taliaferro, a doctoral student at Harvard Business School; Michael Quinn, vice president at Analysis Group; and Peter Tufano, a professor at Harvard Business School. The researchers found that the assumption that mutual funds' NAV, which is calculated once a day, reflects the trading activity that took place that day, is a false assumption.

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