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Please use this identifier to cite or link to this item:
http://hdl.handle.net/10016/7491
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| Title: | When cheaper is better: Fee determination in the market for equity mutual funds |
| Author(s): | Gil-Bazo, Javier [jjgil]
Ruiz-Verdú, Pablo [prverdu] |
| Publisher: | Elsevier |
| Issued date: | Sep-2008 |
| Citation: | Journal of Economic Behavior and Organization, 2008, 67, 3-4. p.871-885 |
| URI: | http://hdl.handle.net/10016/7491 |
| ISSN: | 0167-2681 |
| DOI: | http://dx.doi.org/10.1016/j.jebo.2007.04.003 |
| Abstract: | In this paper, we develop a model of the market for equity mutual funds that captures three key characteristics of this market. First, there is competition among funds. Second, fund managers’ ability is not observed by investors before making their investment decisions. Third, some investors do not make optimal use of all available information. The main results of the paper are that (1) price competition is compatible with positive mark-ups in equilibrium, and (2) worse-performing funds set fees that are greater or equal to those set by better-performing funds. These predictions are supported by available empirical evidence. |
| Review: | PeerReviewed |
| Publisher version: | http://dx.doi.org/10.1016/j.jebo.2007.04.003 |
| Keywords: | Mutual fund fees
Mutual fund performance
Product quality
Asymmetric information
Bounded rationality |
| JEL Classification: | L13, L15, G23, D80 |
| Appears in Collections: | Economists Online
DEE - Artículos de Revistas
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