On causality in the size-efficiency relationship: the effect of investor cash flows on the mutual fund industry
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http://dx.doi.org/10.1080/00036841003800849 |
Metadatos
Título
On causality in the size-efficiency relationship: the effect of investor cash flows on the mutual fund industryAutoría
Fecha de publicación
2010-12-14ISSN
0003–6846; 1466–4283Cita bibliográfica
Applied Economics Letters (2011), Vol. 43, no. 27, 4069-4079Tipo de documento
info:eu-repo/semantics/articleVersión de la editorial
http://www.tandfonline.com/doi/full/10.1080/00036841003800849Versión
info:eu-repo/semantics/publishedVersionPalabras clave / Materias
Resumen
One of the perceived advantages in mutual fund management is the presence of economies of scale resulting from fund size. This article analyses the impact of mutual fund cash flows on the relation between size and ... [+]
One of the perceived advantages in mutual fund management is the presence of economies of scale resulting from fund size. This article analyses the impact of mutual fund cash flows on the relation between size and performance, demonstrating that performance determines asymmetric variations in fund assets, particularly in mutual equity funds. Therefore, the more efficient funds generate broad enough cash flow entry that increases the relative size of the fund, leading to an implicit and positive relation between size and performance. So, if the average size over the period sample is used as a measure of size, such a relation would be biased. When the initial size is used, this bias is avoided and, in general, an insignificant relation is found between size and performance. These results are controlled by mutual fund costs using gross returns to estimate performance. The evidence is robust, and shows only weak evidence of a negative relation between size and performance for the balanced funds that is driven by a low positive relation between costs and size; precisely, the contrary that is expected from the hypothesis of the presence of economies of scale. [-]
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