Trading is Hazardous to Your Wealth: Evidence from Mutual Funds Around the World

45 Pages Posted: 30 Nov 2017 Last revised: 26 Jan 2018

See all articles by Teodor Dyakov

Teodor Dyakov

Vrije Universiteit Amsterdam, School of Business and Economics; Tinbergen Institute

Hao Jiang

Michigan State University

Marno Verbeek

Erasmus University - Rotterdam School of Management; Erasmus Research Institute of Management (ERIM); Netspar

Date Written: November 27, 2017

Abstract

We study the trading performance of actively-managed mutual funds from 16 domicile countries investing in 42 equity markets over the period 2001-2014. In the aggregate, funds achieve particularly poor returns in U.S. equity: after adjusting for style, the stocks they buy underperform those they sell by 0.61% per quarter. In non-U.S. equity, mutual fund trades achieve a gross quarterly return of only 0.19%, which appears small relative to trading costs in international markets. The relative size of the active mutual fund industry and the tendency of mutual funds to trade in herds contribute to their poor trading performance. Using the U.S. market as an important case with a longer time series and richer information, we find further supporting evidence.

Keywords: international mutual funds, trading performance, herding

Suggested Citation

Dyakov, Teodor and Jiang, Hao and Verbeek, Marno, Trading is Hazardous to Your Wealth: Evidence from Mutual Funds Around the World (November 27, 2017). Available at SSRN: https://ssrn.com/abstract=3078535 or http://dx.doi.org/10.2139/ssrn.3078535

Teodor Dyakov (Contact Author)

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands
+31 20 59 82197 (Phone)
+31 20 59 86020 (Fax)

HOME PAGE: http://www.teodordyakov.work

Tinbergen Institute ( email )

De Boelelaan 1105
Amsterdam, 1081 HV
Netherlands

Hao Jiang

Michigan State University ( email )

315 Eppley Center
Department of Finance
East Lansing, MI 48824
United States

HOME PAGE: http://sites.google.com/site/haojiangfinance/

Marno Verbeek

Erasmus University - Rotterdam School of Management ( email )

P.O. Box 1738
Room T09-53
3000 DR Rotterdam
Netherlands
+31 10 408 2790 (Phone)

HOME PAGE: http://www.rsm.nl/mverbeek

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Netspar

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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