Another explanation of the mutual fund fee puzzle

Hu, May, Chao, Chi-Chur and Lim, Jin Hao 2016, Another explanation of the mutual fund fee puzzle, International review of economics and finance, vol. 42, pp. 134-152, doi: 10.1016/j.iref.2015.11.002.

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Title Another explanation of the mutual fund fee puzzle
Author(s) Hu, MayORCID iD for Hu, May orcid.org/0000-0002-0998-1592
Chao, Chi-ChurORCID iD for Chao, Chi-Chur orcid.org/0000-0002-1056-469X
Lim, Jin Hao
Journal name International review of economics and finance
Volume number 42
Start page 134
End page 152
Total pages 19
Publisher Elsevier
Place of publication Amsterdam, The Netherlands
Publication date 2016-03
ISSN 1059-0560
Keyword(s) Investor sentiment
Mutual funds
Fees
Performance
Summary 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.
Language eng
DOI 10.1016/j.iref.2015.11.002
Field of Research 150203 Financial Institutions (incl Banking)
Socio Economic Objective 900102 Investment Services (excl. Superannuation)
HERDC Research category C1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2015, Elsevier
Persistent URL http://hdl.handle.net/10536/DRO/DU:30080549

Document type: Journal Article
Collections: Department of Economics
Department of Finance
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