Another explanation of the mutual fund fee puzzle

Hu, M, Chao, C and Lim, J 2016, 'Another explanation of the mutual fund fee puzzle', International Review of Economics and Finance, vol. 42, pp. 134-152.


Document type: Journal Article
Collection: Journal Articles

Title Another explanation of the mutual fund fee puzzle
Author(s) Hu, M
Chao, C
Lim, J
Year 2016
Journal name International Review of Economics and Finance
Volume number 42
Start page 134
End page 152
Total pages 19
Publisher Elsevier BV
Abstract This paper demonstrates that investor sentiment explains the recent puzzle of the negative relation between fees and before-fee performance of equity mutual funds. Using a composite proxy for investor sentiment, the puzzle can be explained stronger by investor sentiment, compared to the strategic fee-setting explanation discussed in the literature. More-sentiment driven investors would like to select more skilled fund managers, leading to a better future performance in short run. Additionally, when sentiment is high (low), it results in lower (higher) fees. Our results highlight the use of investor sentiment approach in determining mutual fund fees and performance.
Subject Banking, Finance and Investment not elsewhere classified
Keyword(s) Fees
Investor sentiment
Mutual funds
Performance
DOI - identifier 10.1016/j.iref.2015.11.002
Copyright notice © 2015 Elsevier Inc.
ISSN 1059-0560
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