The Determinants of Mutual Fund Performance: A Cross-Country Study

56 Pages Posted: 26 Nov 2006 Last revised: 29 Jul 2011

Miguel A. Ferreira

Nova School of Business and Economics; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Aneel Keswani

Faculty of Finance, Cass Business School, City University, London

Antonio F. Miguel

Instituto Universitário de Lisboa (ISCTE - IUL)

Sofia Brito Ramos

ESSEC

Date Written: July 27, 2011

Abstract

We use a new data set to study the determinants of the performance of open-end actively managed equity mutual funds in 27 countries. We find that mutual funds underperform the market overall. The results show important differences in the determinants of fund performance in the U.S. and elsewhere in the world. The U.S. evidence of diminishing returns to scale is not an universal truth as the performance of funds located outside the U.S. and funds that invest overseas is not negatively affected by scale. Our findings suggest that the adverse scale effects in the U.S. are related to liquidity constraints faced by funds that, by virtue of their style, have to invest in small and domestic stocks. Country characteristics also explain fund performance. Funds located in countries with liquid stock markets and strong legal institutions display better performance.

Keywords: Mutual funds, Performance, Fund characteristics, Investor protection

JEL Classification: G15, G18, G23

Suggested Citation

Ferreira, Miguel A. and Keswani, Aneel and Miguel, Antonio F. and Ramos, Sofia Brito, The Determinants of Mutual Fund Performance: A Cross-Country Study (July 27, 2011). Swiss Finance Institute Research Paper No. 31. Available at SSRN: https://ssrn.com/abstract=947098 or http://dx.doi.org/10.2139/ssrn.947098

Miguel Almeida Ferreira

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Aneel Keswani

Faculty of Finance, Cass Business School, City University, London ( email )

106 Bunhill Row
London EC1Y 8TZ
Great Britain
+44 207 040 8763 (Phone)

Antonio Freitas Miguel (Contact Author)

Instituto Universitário de Lisboa (ISCTE - IUL) ( email )

Av. das Forcas Armadas
Lisboa, 1649-026
Portugal
+351 217 903 000 (Phone)

Sofia Brito Ramos

ESSEC ( email )

3 Avenue Bernard Hirsch
CS 50105 CERGY
CERGY, CERGY PONTOISE CEDEX 95021
France

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