The Persistence of Fee Dispersion among Mutual Funds
57 Pages Posted: 18 Aug 2009 Last revised: 25 Jan 2018
Date Written: January 24, 2018
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: Suggested Citation