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- Title
PRODUCE DIFFERENTIATION, SEARCH COSTS, AND COMPETITION IN THE MUTUAL FUND INDUSTRY.
- Authors
Hortaçsu, Ali; Syverson, Chad
- Abstract
We investigate the role that nonportfolio fund differentiation and information/search frictions play in creating two salient features of the mutual fund industry: the large number of funds and the sizable dispersion in fund fees. In a case study we find that despite the financial homogeneity of S&P 500 index funds, this sector exhibits the fund proliferation and fee dispersion observed in the broader industry. We show how extra-portfolio mechanisms explain these features. These mechanisms also suggest an explanation for the puzzling late-1990s shift in sector assets to more expensive (and often newly entered) funds: an influx of high-information-cost novice investors.
- Subjects
MUTUAL funds; INVESTMENTS; FINANCE; PORTFOLIO management (Investments)
- Publication
Quarterly Journal of Economics, 2004, Vol 119, Issue 2, p403
- ISSN
0033-5533
- Publication type
Case Study
- DOI
10.1162/0033553041382184