Size Doesn't Matter: Diseconomies of Scale in the Mutual Fund Industry Revisited

30 Pages Posted: 11 Feb 2018

See all articles by Blake Phillips

Blake Phillips

University of Waterloo

Kuntara Pukthuanthong

University of Missouri, Columbia

P. Raghavendra Rau

University of Cambridge

Date Written: January 1, 2018

Abstract

The academic literature has found mixed evidence that fund size is negatively related to performance. One reason for the lack of consensus may be that the fund size and performance relation is endogenous. In this paper, we identify a set of instrumental variables that influence fund size but are unrelated to expected fund performance. Using this specification, we show that fund size does not appear to affect fund performance.

Keywords: Mutual Fund Performance, Size-Performance Relation, Instrumental Variables, Diseconomies of Scale

Suggested Citation

Phillips, Blake and Pukthuanthong, Kuntara and Rau, P. Raghavendra, Size Doesn't Matter: Diseconomies of Scale in the Mutual Fund Industry Revisited (January 1, 2018). Journal of Banking and Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3114363

Blake Phillips

University of Waterloo ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1 N2L 3G1
Canada

Kuntara Pukthuanthong

University of Missouri, Columbia ( email )

Robert J. Trulaske, Sr. College of Business
403 Cornell Hall
Columbia, MO 65211
United States
6198076124 (Phone)

HOME PAGE: http://https://kuntara.weebly.com

P. Raghavendra Rau (Contact Author)

University of Cambridge ( email )

Cambridge Judge Business School
Trumpington Street
Cambridge, Cambridgeshire CB21AG
United Kingdom
3103626793 (Phone)

HOME PAGE: http://www.raghurau.com/

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