Article ID Journal Published Year Pages File Type
5083141 International Review of Economics & Finance 2016 19 Pages PDF
Abstract
This paper demonstrates that investor sentiment explains the recent puzzle of the negative relation between fees and before-fee performance of equity mutual funds. Using a composite proxy for investor sentiment, the puzzle can be explained stronger by investor sentiment, compared to the strategic fee-setting explanation discussed in the literature. More-sentiment driven investors would like to select more skilled fund managers, leading to a better future performance in short run. Additionally, when sentiment is high (low), it results in lower (higher) fees. Our results highlight the use of investor sentiment approach in determining mutual fund fees and performance.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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