Document Type

Article

Date

6-20-2003

Embargo Period

12-5-2011

Keywords

tbd

Disciplines

Economics

Description/Abstract

We investigate the effect of fund size on performance among active mutual funds. We first document that fund returns, both before and after management fees, decline with fund size, even after adjusting performance by various benchmarks and controlling for other fund characteristics such as turnover and age. We then explore a number of potential explanations for this relationship. We find that the effect of fund size on fund returns is most pronounced among funds that play small cap stocks. Interestingly, performance only depends on fund size and does not decline with family size. Finally, small funds are better than large ones at investing in local companies. We argue that these findings are consistent with both liquidity and organizational diseconomies being important factors behind the documented diseconomies of scale in money management.

Additional Information

This manuscript is from the Social Science Research Network, for more information see http://papers.ssrn.com/sol3/papers.cfm?abstract_id=327960#1087292

Source

Harvested from ssrn.com

Included in

Economics Commons

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