The Economics of Mutual-Fund Brokerage: Evidence from the Cross Section of Investment Channels
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
December 20, 2005
AFA 2006 Boston Meetings Paper
Retail investors often lack investment expertise. Mutual-fund brokers can help, but their incentives are mixed so it is an empirical question what value they add, both for consumers and for fund families. Investors pay more to invest through unaffiliated brokers than captive brokers, and while unaffiliated brokers add more value to redemptions, captive brokers add more value to inflows. No-load investors are less likely to sell their poor-performing funds and more likely to sell their winning funds, consistent with a disposition effect. Fund families benefit from a captive salesforce through recapture of redemptions, but also suffer through cannibalization of inflows.
Number of Pages in PDF File: 37
Keywords: Mutual Fund, Financial Intermediary, Brokers
Date posted: March 23, 2005 ; Last revised: December 11, 2011
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