Article (Scientific journals)
The Persistence of Fee Dispersion among Mutual Funds
Halling, Michael; Cooper, Michael; Yang, Wenhao
2021In Review of Finance, 25 (2), p. 365-402
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Abstract :
[en] Previous work shows large differences in fees for S&P 500 index funds and other funds, and suggests that investors suffer wealth losses investing in high-fee funds when similar low-fee funds are available. In contrast, the neoclassical model of mutual funds (Berk and van Binsbergen, 2015) argues that percentage fees are irrelevant, as fund size will adjust in equilibrium such that net alphas are equal to zero. We show that fees matter from an investor perspective. We document (a) a strong negative association between net-of-fee fund performance and fees in a sample of all US and international equity funds, (b) economically large, robust, persistent, and pervasive fee dispersion in the mutual fund industry, and (c) important economic effects for investors. During the sample period, the mutual fund industry has generated a total value lost (i.e., a negative net value added) of 125 billion USD, coming predominantly from high-fee funds.
Disciplines :
Finance
Author, co-author :
Halling, Michael  ;  University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Department of Finance (DF)
Cooper, Michael
Yang, Wenhao
External co-authors :
yes
Language :
English
Title :
The Persistence of Fee Dispersion among Mutual Funds
Publication date :
March 2021
Journal title :
Review of Finance
ISSN :
1572-3097
eISSN :
1875-824X
Publisher :
Oxford University Press, Oxford, United Kingdom
Volume :
25
Issue :
2
Pages :
365-402
Peer reviewed :
Peer Reviewed verified by ORBi
Available on ORBilu :
since 13 October 2022

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