Short-Term Performance and Mutual Fund Size

28 Pages Posted: 30 Jun 2016 Last revised: 10 Sep 2017

Javier Vidal-García

Harvard University; Complutense University Madrid

Marta Vidal

Universidad Complutense de Madrid (UCM); Universidad Europea de Madrid

Date Written: June 28, 2016


We examine the relation between short-term mutual fund performance and fund size around the world. Using a large sample of worldwide equity funds we show that small funds outperform large funds, suggesting diseconomies of scale for the mutual fund industry across countries. We find that fund size shows a significantly negative coefficient using both net returns and Carhart alphas as dependent variables, confirming the evidence that funds show diminishing returns to scale. We also find evidence of a negative fund effect on stock picking ability, which indicates that the smallest funds have superior stock picking skills compared to bigger funds. In contrast, market timing ability exhibits positive size effect, suggesting that the largest the size of the fund, the greater the fund manager´s skills to accurately anticipate the market fluctuations.

Keywords: Mutual Fund; Performance Measurement; Market Timing; Fund Size.

JEL Classification: G11, G12

Suggested Citation

Vidal-García, Javier and Vidal, Marta, Short-Term Performance and Mutual Fund Size (June 28, 2016). Available at SSRN: or

Javier Vidal-García (Contact Author)

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

Complutense University Madrid ( email )

School of Business Administration
Somosaguas Campus
Madrid, Madrid 28223

Marta Vidal

Universidad Complutense de Madrid (UCM) ( email )

Carretera de Humera s/n
Madrid, Madrid 28223

Universidad Europea de Madrid ( email )

28670 Villaviciosa de Odón

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