The Performance of Japanese Mutual Funds
Posted: 11 May 1995
We analyze the performances of Japanese open-type stock mutual funds for the 1981-1992 period. The results show that, regardless of the performance measures and benchmarks employed, most of the Japanese mutual funds underperform the benchmarks by between 3.6% to 10.8% per annum. These funds tend to invest more in large stocks with low book-to-market ratios that underperform the benchmark index by approximately 8% per annum. However, this does not necessarily explain the underperformance of the mutual funds. In Japan, a new investor of an open-type fund only pays in the after-tax value of the net asset value. Such institutional rule dilutes the net asset value per share when there is inflow of funds. We conduct a bootstrap experiment to assess the magnitude of this dilution effect.
JEL Classification: G20
Suggested Citation: Suggested Citation