42 Pages Posted: 27 Nov 2016 Last revised: 1 Mar 2017
Date Written: February 23, 2017
We examine the changes in performance of mutual funds that result from changes in the scope of responsibilities of fund managers. After confirming that scope is expanded (reduced) in response to positive (negative) past performance (alpha), we document that changes in manager-level scope attenuate fund-fund level performance differences after controlling for effects related to fund size. Our results suggest a significant diseconomy of scope exists with respect to performance similar to the diseconomies of scale previously highlighted and that, together, these two effects may explain the observed attenuation over time in abnormal relative mutual fund returns.
Keywords: mutual fund managers, performance persistence, diseconomies of scale, diseconomies of scope
JEL Classification: G23
Suggested Citation: Suggested Citation
Evans, Richard B. and Gil-Bazo, Javier and Lipson, Marc L., Diseconomies of Scope and Mutual Fund Performance (February 23, 2017). Darden Business School Working Paper No. 2874975. Available at SSRN: https://ssrn.com/abstract=2874975 or http://dx.doi.org/10.2139/ssrn.2874975