The Persistence of Fee Dispersion among Mutual Funds

57 Pages Posted: 18 Aug 2009 Last revised: 25 Jan 2018

Michael J. Cooper

University of Utah - David Eccles School of Business

Michael Halling

Stockholm School of Economics & Swedish House of Finance

Wenhao Yang

University of South Carolina - Darla Moore School of Business

Date Written: January 24, 2018

Abstract

Previous work shows large differences in fees for S&P 500 index funds. We expand this work to compare fees across all US equity funds using two methods, regression-based pricing models and holdings-based fund matching, to control for fund heterogeneity. We find economically large, robust, persistent and pervasive fee dispersion in the mutual fund industry. Importantly, fee dispersion exists among the largest funds (top TNA quintile) as well as among institutional funds. Most surprisingly, fee dispersion has noticeably increased over the last twenty years, even as the industry has experienced enormous growth in capital invested and the number of funds. Time-series regressions show that yearly changes in fee dispersion are positively related to market returns and changes in household participation in the fund industry and negatively related to the size of the mutual fund industry.

Keywords: Mutual Funds, Fund Fees, Price Dispersion, Price Persistence

JEL Classification: G10, G11, G23

Suggested Citation

Cooper, Michael J. and Halling, Michael and Yang, Wenhao, The Persistence of Fee Dispersion among Mutual Funds (January 24, 2018). Swedish House of Finance Research Paper No. 14-11. Available at SSRN: https://ssrn.com/abstract=1456079 or http://dx.doi.org/10.2139/ssrn.1456079

Michael J. Cooper (Contact Author)

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

Michael Halling

Stockholm School of Economics & Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

Wenhao Yang

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States

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