Why Do Investors Buy Shares of Actively Managed Equity Mutual Funds? Considering the Correct Reference Portfolio from an Uninformed Investor’s Perspective

Equity Mutual Funds and Separately Managed Equity Accounts: Considerations for Taxable Investors

Why are some mutual funds closed to new investors?

Fund families typically claim that closing a fund protects the fund’s superior performance by preventing it from growing too large to be managed efficiently. Even though funds with better performance and larger size are more likely to be closed, there is no evidence that closing a fund can indeed protect its performance. Instead, fund closing decisions are more likely to be motivated by spillov...

Why Do Investors Trade?

We propose and estimate a structural model of daily stock market activity to test competing theories of trading volume. The model features informed rational speculators and uninformed agents who trade either to hedge endowment shocks or to speculate on perceived information. To identify the model parameters, we exploit enormous empirical variation in trading volume, market liquidity, and return...

The Performance of Mutual Funds That Close to New Investors

VOL. 6, NO. 2, WINTER 2003/2004 47 Abstract We examined mutual funds that closed to new investors for the period 1995 to 2001. We found that closed funds outperformed their peers before closing and that this superior performance decreased after the fund closed. We also investigated the performance of funds that reopened, a sample never before examined. We found that this group of funds performe...

The Role of Uninformed Investors in an Optimal IPO Mechanism

This paper explores optimal ways for a firm to sell its initial public offering (IPO) to a mix of informed and uninformed investors through an intermediary. I argue that uninformed investors provide a benchmark for informed investors, resulting in an endogenous constraint that affects the issuer’s revenue. I conclude that higher revenues are achieved with higher numbers of uninformed investors ...