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

Abstract

This is the accepted version of the paper.This version of the publication may differ from the final published version. Permanent repository link AbstractWe 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.JEL classification: G15; G18; G23

On the Construction of Common Size, Value and Momentum Factors in International Stock Markets: A Guide with Applications

“…Further countryspecific studies include Ammann and Steiner (2008) (Switzerland), Artmann et al (2012) (Germany), Dimson et al (2003), Gregory et al (2009), Nagel (2001 (all three U.K.). Additional examples of studies that have employed non-US data to study empirical asset pricing models include, besides the studies already mentioned, An and Ng (2010), Ang et al (2008), Asness and Frazzini (2013), , Eun et al (2010), Fama andFrench (1998, 2012), Ferreira et al (2013), Heston et al (1999), Hou et al (2011), Leippold andLohre (2012a, 2012b), Liew and Vassalou (2000), and Rouwenhorst (1998). In several cases, the constructed risk factors are not available to other researchers, though there are also important exceptions.…”

Determinants of Development of the Mutual Fund Industry. A Socio-Cultural Approach

“…Specifi cally, we used the ratio of stock market total value traded to GDP (SM traded value) as in Klapper et al(2004) and Ferreira et al(2013), the ratio of liquid liabilities in the economy 3 Our sample contains the following high-income countries: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Italy, Japan, Republic of Korea, the Netherlands, New Zealand, Norway, Portugal, Slovenia, Spain, Sweden, Switzerland, the United Kingdom, and the United States. The upper-middle income and lower-middle income countries are: Argentina, Brazil, the Czech Republic, Chile, China, Hungary, India, Mexico, Pakistan, Philippines, Poland, Romania, Russia, Slovakia, South Africa, and Turkey.…”

“…As a measure of industry development, we used the industry age based on the assumption that the creation of a mutual fund or the legal provisions for this industry alone are not suffi cient to determine positive effects on the economy (Khorana et al, 2005;Ferreira et al, 2013).…”

Performance of Public Mutual Funds (PMFs) in Emerging Economies: A Case of Bangladesh

“…Generally, the age of funds effects on performance in both directions. However, younger mutual funds are more vigilant and can suffer from their early stages due to this fund face higher costs and lack of experience (Ferreira et al, 2012). Younger mutual funds performance can also be affected during investment learning period due to fund managers lesser experience on fund operations (Gregory, Matatko, & Luther, 1997).…”