Abstract

http://ssrn.com/abstract=1393289
 
 

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What do Consumers’ Fund Flows Maximize? Evidence from Their Brokers’ Incentives


Susan Kerr Christoffersen


University of Toronto - Rotman School of Management; Copenhagen Business School

Richard B. Evans


University of Virginia - Darden School of Business

David K. Musto


University of Pennsylvania - Finance Department

March 8, 2012

Journal of Finance, Forthcoming
Darden Business School Working Paper No. 1393289

Abstract:     
We ask whether mutual funds’ flows reflect the incentives of the brokers intermediating them. The incentives we address are those revealed in statutory filings: the brokers’ shares of sales loads and other revenue, and their affiliation with the fund family. We find significant effects of these payments to brokers on funds’ inflows, particularly when the brokers are not affiliated. Tracking these investments forward, we find load sharing, but not revenue sharing, to predict poor performance, consistent with the different incentives these payments impart. We identify one benefit of captive brokerage, which is the recapture of redemptions elsewhere in the family.

Number of Pages in PDF File: 60

Keywords: Brokers, mutual funds, compensation, revenue-sharing

JEL Classification: G23, G24, M31

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Date posted: April 22, 2009 ; Last revised: March 16, 2012

Suggested Citation

Christoffersen, Susan Kerr and Evans, Richard B. and Musto, David K., What do Consumers’ Fund Flows Maximize? Evidence from Their Brokers’ Incentives (March 8, 2012). Journal of Finance, Forthcoming; Darden Business School Working Paper No. 1393289. Available at SSRN: http://ssrn.com/abstract=1393289 or http://dx.doi.org/10.2139/ssrn.1393289

Contact Information

Susan E. Christoffersen (Contact Author)
University of Toronto - Rotman School of Management ( email )
105 St. George Street
Toronto, Ontario M5S 3E6
Canada
416 946 5647 (Phone)
416 971 3048 (Fax)
HOME PAGE: http://www.rotman.utoronto.ca/schristoffersen

Copenhagen Business School
Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark
Richard B. Evans
University of Virginia (UVA) - Darden School of Business ( email )
P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4030 (Phone)
434-243-7680 (Fax)
HOME PAGE: http://faculty.darden.virginia.edu/evansr/
David K. Musto
University of Pennsylvania - Finance Department ( email )
The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

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