Redemption Fees and the Risk-Adjusted Performance of International Equity Mutual Funds

Journal of Investment Management (JOIM), Third Quarter 2012

Pace University Finance Research Paper No. 2012/16

Posted: 13 Oct 2012

See all articles by Iuliana Ismailescu

Iuliana Ismailescu

Pace University - Lubin School of Business

Matthew R. Morey

Pace University - Lubin School of Business - Department of Finance and Economics

Multiple version iconThere are 2 versions of this paper

Date Written: October 12, 2012

Abstract

In the wake of the market timing and late trading mutual fund scandals, many mutual funds adopted redemption fees to limit market timing. In this paper we investigate the impact of redemption fees on the risk-adjusted performance of U.S.-based international equity funds, the very funds that many market timers used.We find three interesting results. First, using event study methodology we find that after the introduction of redemption fee there is a significant increase in the risk-adjusted fund performance. Second, we find that funds that introduced larger size redemption fees have significantly better performance after the introduction of the redemption fee than other funds. Third, we find that the main reason for the improvement in fund performance after the introduction of the redemption fee is due to lower amounts of cash being held by the fund after the redemption fee. In sum our results suggest that implementation of redemption fees is performance enhancing for international equity funds. As such, long-term investors of international equity funds should actively look for international equity funds that have redemption fees.

Keywords: Mutual funds, international markets, redemption fees, fund performance

JEL Classification: G00

Suggested Citation

Ismailescu, Iuliana and Morey, Matthew R., Redemption Fees and the Risk-Adjusted Performance of International Equity Mutual Funds (October 12, 2012). Journal of Investment Management (JOIM), Third Quarter 2012, Pace University Finance Research Paper No. 2012/16, Available at SSRN: https://ssrn.com/abstract=2161098

Iuliana Ismailescu (Contact Author)

Pace University - Lubin School of Business ( email )

One Pace Plaza
New York, NY 10038
United States
212-618-6524 (Phone)

Matthew R. Morey

Pace University - Lubin School of Business - Department of Finance and Economics ( email )

One Pace Plaza
New York, NY 10038-1502
United States
212-618-6471 (Phone)

HOME PAGE: http://webpage.pace.edu/mmorey/

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
326
PlumX Metrics