The tradeoff between mutual fund and direct stock investments: a theoretical analysis involving different types of investors

Marekwica, Marcel; Steininger, Bertram I.

doi:10.1007/s11846-013-0101-9

Cited by 3 publications

(1 citation statement)

References 41 publications

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“…In turn, Malkiel (2013) explored the issue of why investors continue to pay excessive fees for financial services of such questionable value. Marekwica and Steininger (2014) also suggest that the fees actively managed mutual funds charge are, in general, too high. In the same vein, Wasik (2013) considers that mutual funds should reduce their fees to values similar to index funds, given the adverse impact they have on fund performance (Mansor et al, 2015).…”

Section: Introductionmentioning

confidence: 99%

On management risk and price in the mutual fund industry: style and performance distribution analysis

2021

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This study shows how investing in mutual funds involves an additional risk, which we call management risk as a consequence of the uncertainty in the results of active management. To address this issue, we analyze a sample of 2,539 US equity mutual funds. For comparative purposes, we differentiate among index funds and actively managed mutual funds with different investment styles. We observe that performance distribution shows negative mean, negative skewness, and excess kurtosis. Results also show that management risk is not rewarded with higher abnormal performance. Moreover, higher active management prices are linked to funds with higher management risk and negative asymmetry. Therefore, investors seem to be risk-seeking since they are paying more to participate in high asymmetric bets.Finally, we attempt to solve this puzzle from the behavioral finance perspective.

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Section: Introductionmentioning

confidence: 99%

On management risk and price in the mutual fund industry: style and performance distribution analysis

2021

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Managers beyond borders: side-by-side management in mutual funds and pension funds

Alda

2019

Rev Manag Sci

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A Study on Factors Influencing Mutual Fund Portfolio Performance

Mekonnen

Mayer

Chien

2018

International Journal of Corporate Finance and Accounting

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Mutual fund portfolio managers do not always meet performance expectations, resulting in loss of capital reserves. Out of 3,612 U.S. based open-ended mutual funds, the risk-adjusted performance of 2,890 (80%) failed to meet the S&P 500 performance between the year 2006 to 2016. Grounded in Markowitz's modern portfolio theory, this correlational study examined the relationship between mutual fund class type, portfolio turnover, fund longevity, management turnover, and annual fund risk-adjusted performance. Archival data were collected from 88 U.S. based equity mutual funds companies. The results of the multiple regression analysis indicated the model as a whole was able to significantly predict annual fund risk-adjusted performance for the 5-year period ending 2016, F (4, 83) = 3.581, p = .010, R2 = .147. In the final model, mutual fund class type and portfolio turnover were statistically significant with mutual fund class type (ß= .249, t = 2.302, p = .024) accounting for a higher contribution to the model than portfolio turnover (ß = .238, t = 2.312, p = .023).

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The tradeoff between mutual fund and direct stock investments: a theoretical analysis involving different types of investors

Cited by 3 publications

References 41 publications

On management risk and price in the mutual fund industry: style and performance distribution analysis

On management risk and price in the mutual fund industry: style and performance distribution analysis

Managers beyond borders: side-by-side management in mutual funds and pension funds

A Study on Factors Influencing Mutual Fund Portfolio Performance

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