Why Do Mutual Fund Expenses Matter?

Why constrain your mutual fund manager ? $

We examine the form, adoption rates, and economic rationale for various mutual fund investment restrictions. A sample of U.S. domestic equity funds from 1994 to 2000 reveals systematic patterns in investment constraints, consistent with an optimal contracting equilibrium in the fund industry. Restrictions are more common when (i) boards contain a higher proportion of inside directors, (ii) the ...

Do Mutual Fund Managers Monitor Executive Compensation?

We find significant relations between active mutual fund portfolio holdings and executive compensation, which appear to be largely driven by mutual fund investment styles rather than monitoring behaviour. Aggressive growth fund holdings are associated with performance pay, while income fund holdings are negatively related. We also find that mutual fund holdings are insensitive to changes in exe...

Why Do Mutual Fund Advisory Contracts Change? Performance, Growth, and Spillover Effects

We examine changes in equity mutual funds’’ investment advisory contracts. There are substantial advisory compensation rate changes in both directions, with typical percentage rate shifts exceeding one-fourth. We find that rate increases are associated with superior past marketadjusted performance, whereas rate decreases reflect economies of scale associated with growth, and are not associated ...

Why Do Retail Investors Make Costly Mistakes? An Experiment on Mutual Fund Choice

Do Liquidity and Idiosyncratic Risk Matter?: Evidence from the European Mutual Fund Market

This paper examines the interaction of idiosyncratic risk, liquidity and return across time in determining fund performance, as well as across investment style portfolios of European mutual funds. This study utilizes a unique data set including returns for equity mutual funds registered in six European countries. Overall, using monthly data, we find that both liquidity and idiosyncratic risk ar...