Abstract

http://ssrn.com/abstract=496315
 
 

References (20)



 
 

Citations (132)



 


 



Out of Sight, Out of Mind: The Effects of Expenses on Mutual Fund Flows


Brad M. Barber


University of California, Davis

Terrance Odean


University of California, Berkeley - Haas School of Business

Lu Zheng


University of California, Irvine - Paul Merage School of Business

December 2003


Abstract:     
We argue that the purchase decisions of mutual fund investors are influenced by salient, attention-grabbing information. Investors are more sensitive to salient in-your-face fees, like front-end loads and commissions, than operating expenses; they are likely to buy funds that attract their attention through exceptional performance, marketing, or advertising. Our empirical analysis of mutual fund flows over the last 30 years yields strong support for our contention. We find consistently negative relations between fund flows and front-end load fees. We also document a negative relation between fund flows and commissions charged by brokerage firms. In contrast, we find no relation (or a perverse positive relation) between operating expenses and fund flows. Additional analyses indicate that mutual fund marketing and advertising, the costs of which are often embedded in a fund's operating expenses, account for this surprising result.

Number of Pages in PDF File: 36

Keywords: mutual funds, investor behavior, operating expenses

JEL Classification: G11, G18

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Date posted: May 3, 2004  

Suggested Citation

Barber, Brad M. and Odean, Terrance and Zheng, Lu, Out of Sight, Out of Mind: The Effects of Expenses on Mutual Fund Flows (December 2003). Available at SSRN: http://ssrn.com/abstract=496315 or http://dx.doi.org/10.2139/ssrn.496315

Contact Information

Brad M. Barber (Contact Author)
University of California, Davis ( email )
Graduate School of Management
One Shields Avenue
Davis, CA 95616
United States
530-752-0512 (Phone)
530-752-2924 (Fax)
Terrance Odean
University of California, Berkeley - Haas School of Business ( email )
545 Student Services Building
Berkeley, CA 94720
United States
510-642-6767 (Phone)
510-666-2561 (Fax)
HOME PAGE: http://www.haas.berkeley.edu/faculty/odean.html
Lu Zheng
University of California, Irvine - Paul Merage School of Business ( email )
Irvine, CA California 92697-3125
United States
9498248365 (Phone)
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