Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
8948017 | Journal of Financial Markets | 2018 | 20 Pages |
Abstract
We extend the model of Berk and Green (2004) to investigate the impact of two frictions, search costs and financial constraints, on mutual fund performance. Our model predicts the survival of underperforming funds and delivers two new predictions: 1) differences in performance across funds are likely to persist; and 2) mutual funds targeted to less sophisticated investors should exhibit higher dispersion in expected performance. Using data on U.S. domestic diversified equity mutual funds we find empirical support for these predictions.
Related Topics
Social Sciences and Humanities
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Economics and Econometrics
Authors
Ariadna Dumitrescu, Javier Gil-Bazo,