Publication:
When cheaper is better: Fee determination in the market for equity mutual funds

Thumbnail Image
Identifiers
URI: https://hdl.handle.net/10016/7491
ISSN: 0167-2681
DOI: 10.1016/j.jebo.2007.04.003
Files
gilbazoruizverdu08.pdf (230.62 KB)
Publication date
2008-09
Defense date
Authors
Advisors
Tutors
Journal Title
Journal ISSN
Volume Title
Publisher
Elsevier
Impact
Google Scholar
Export
Research Projects
Organizational Units
Journal Issue
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.
Description
Keywords
Mutual fund fees, Mutual fund performance, Product quality, Asymmetric information, Bounded rationality
Bibliographic citation
Journal of Economic Behavior and Organization, 2008, 67, 3-4. p.871-885
Collections
DEE - Artículos de Revistas
Economists Online