The Open-End Japanese Mutual Fund Puzzle

44 Pages Posted: 23 Apr 1998  

Stephen J. Brown

New York University - Stern School of Business

William N. Goetzmann

Yale School of Management - International Center for Finance; National Bureau of Economic Research (NBER)

Takato Hiraki

Tokyo University of Science - School of Management

Toshiyuki Otsuki

International University of Japan

Noriyoshi Shiraishi

Rikkyo University - School of Social Relations

Date Written: November 1997

Abstract

Recent empirical evidence has suggested that the Japanese mutual fund industry has underperformed dramatically in the past two decades. Conjectured reasons for under performance range from tax-dilution effect to high fees, high turnover and poor asset management. In this paper, we show that this underperformance is largely due to tax-dilution effects and not necessarily due to poor management. Using a broad database of funds which includes investment trusts closed to new investment we show that once an instrument for the time-varying tax-dilution exposure is included in a factor model, there is little evidence of poor risk-adjusted performance. A style analysis of the industry demonstrates that managers appear to pursue tax-driven dynamic strategies.

JEL Classification: G2, F3

Suggested Citation

Brown, Stephen J. and Goetzmann, William N. and Hiraki, Takato and Otsuki, Toshiyuki and Shiraishi, Noriyoshi, The Open-End Japanese Mutual Fund Puzzle (November 1997). Available at SSRN: https://ssrn.com/abstract=79453 or http://dx.doi.org/10.2139/ssrn.79453

Stephen J. Brown

New York University - Stern School of Business ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0306 (Phone)
212-995-4233 (Fax)

William N. Goetzmann (Contact Author)

Yale School of Management - International Center for Finance ( email )

165 Whitney Ave.
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-5950 (Phone)
203-436-9252 (Fax)

HOME PAGE: http://viking.som.yale.edu

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Takato Hiraki

Tokyo University of Science - School of Management ( email )

6-3-1 NiiJuku Katsushika-Ku
Tokyo, 125-8585
Japan
+81-480-21-7611 (Phone)
+81-480-21-7654 (Fax)

Toshiyuki Otsuki

International University of Japan ( email )

Yamato-machi
Niigata-ken 949-7277
Japan

Noriyoshi Shiraishi

Rikkyo University - School of Social Relations ( email )

3-chome Nishi-ikebukuro
Toshima-ku
Tokyo, 171-8501
Japan

Paper statistics

Downloads
1,297
Rank
11,199
Abstract Views
11,269