Measuring Market Power in the Spanish Mutual Funds Industry for Retail Investors

31 Pages Posted: 29 Jul 2014 Last revised: 31 Aug 2015

See all articles by Ramiro Losada

Ramiro Losada

Comision Nacional del Mercado de Valores

Date Written: August 31, 2015

Abstract

The mutual fund industry is characterized by high concentration and a high number of offered funds. During last year, the Spanish management companies have reported for the whole market a margin, measured by the Lerner index, of between 25 and 28 per cent. By using an econometric structural model of competition among management companies, it is shown how mutual fund elasticities are low in the retail market. This result casts doubts about the effectiveness of the fee-caps at work. Moreover, a simple model of monopolistic competition pricing is assumed, what it provides estimations of their actual margins above 40 per cent in that market. In order to address this lack of competition, some regulatory measures are proposed.

Keywords: Competition, Market Power, Differentiation

JEL Classification: G23, L11

Suggested Citation

Losada, Ramiro, Measuring Market Power in the Spanish Mutual Funds Industry for Retail Investors (August 31, 2015). Available at SSRN: https://ssrn.com/abstract=2472969 or http://dx.doi.org/10.2139/ssrn.2472969

Ramiro Losada (Contact Author)

Comision Nacional del Mercado de Valores ( email )

c/edison 4
Madrid, Madrid 28006
Spain

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