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Should You Carry the Load? A Comprehensive Analysis of Load and No-Load Mutual Fund Out-of-Sample Performance

29 Pages Posted: 2 Apr 2001  

Matthew R. Morey

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

Date Written: undated

Abstract

This paper compares the out-of-sample performance of no-load and load mutual funds. Unlike the pervious literature, this paper provides a more comprehensive analysis as it uses methodologies to incorporate loads directly into the returns, utilizes a large sample of funds free of survivorship bias, and evaluates performance across many different performance metrics and different ages and styles of funds. We find two important results. First, before adjusting for loads in the returns, no-load funds perform somewhat better than do load funds although the differences are often not significant. However, after adjusting for loads in the return data, no-load funds are found to perform much better than load funds, with the differences found to be significant at the 1 percent level across many different performance metrics. Such findings indicate that investors are giving up a significant amount in terms of performance to hold load funds. Second, we find that within load funds themselves there is no significant difference in out-of-sample performance between high-load funds and low-load funds even after adjusting for loads. Indeed, high-load funds perform only slightly better than do low-load funds before loads are accessed and only slightly worse after loads are accessed. For investors who are only interested in load funds this result suggests that that the amount of the load should not be of much importance when selecting funds.

Keywords: Mutual funds, loads, out-of-sample performance, load-adjusted returns

JEL Classification: G23

Suggested Citation

Morey, Matthew R., Should You Carry the Load? A Comprehensive Analysis of Load and No-Load Mutual Fund Out-of-Sample Performance (undated). Available at SSRN: https://ssrn.com/abstract=265133 or http://dx.doi.org/10.2139/ssrn.265133

Matthew R. Morey (Contact Author)

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/

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