An Empirical Study of the Tails of Mutual Fund Size

6 Pages Posted: 27 May 2010

See all articles by Yonathan Schwarzkopf

Yonathan Schwarzkopf

Lime Brokerage LLC; Santa Fe Institute

J. Doyne Farmer

University of Oxford - Institute for New Economic Thinking at the Oxford Martin School; Santa Fe Institute

Date Written: May 26, 2010

Abstract

The mutual fund industry manages about a quarter of the assets in the U.S. stock market and thus plays an important role in the U.S. economy. The question of how much control is concentrated in the hands of the largest players is best quantitatively discussed in terms of the tail behavior of the mutual fund size distribution. We study the distribution empirically and show that the tail is much better described by a log-normal than a power law, indicating less concentration than, for example, personal income. The results are highly statistically significant and are consistent across fifteen years. This contradicts a recent theory concerning the origin of the power law tails of the trading volume distribution. Based on the analysis in a companion paper, the log-normality is to be expected, and indicates that the distribution of mutual funds remains perpetually out of equilibrium.

Keywords: mutual funds, fund size, power law, log-normal, distribution

Suggested Citation

Schwarzkopf, Yonathan and Farmer, J. Doyne, An Empirical Study of the Tails of Mutual Fund Size (May 26, 2010). Available at SSRN: https://ssrn.com/abstract=1616422 or http://dx.doi.org/10.2139/ssrn.1616422

Yonathan Schwarzkopf (Contact Author)

Lime Brokerage LLC ( email )

625 Broadway
New York, NY 10012
United States

Santa Fe Institute

1399 Hyde Park Road
Santa Fe, NM 87501
United States

J. Doyne Farmer

University of Oxford - Institute for New Economic Thinking at the Oxford Martin School ( email )

Eagle House
Walton Well Road
Oxford, OX2 6ED
United Kingdom

HOME PAGE: http://www.inet.ox.ac.uk/people/view/4

Santa Fe Institute ( email )

1399 Hyde Park Road
Santa Fe, NM 87501
United States
505-984-8800 (Phone)
505-982-0565 (Fax)

HOME PAGE: http://www.santafe.edu/~jdf/

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