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The Determinants of Mutual Fund Performance: A Cross-Country Study

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  • Miguel A. Ferreira
  • Aneel Keswani
  • António F. Miguel
  • Sofia B. Ramos

Abstract

We use a new data set to study the determinants of the performance of open--end actively managed equity mutual funds in 27 countries. We find that mutual funds underperform the market overall. The results show important differences in the determinants of fund performance in the USA and elsewhere in the world. The US evidence of diminishing returns to scale is not a universal truth as the performance of funds located outside the USA and funds that invest overseas is not negatively affected by scale. Our findings suggest that the adverse scale effects in the USA are related to liquidity constraints faced by funds that, by virtue of their style, have to invest in small and domestic stocks. Country characteristics also explain fund performance. Funds located in countries with liquid stock markets and strong legal institutions display better performance. Copyright 2013, Oxford University Press.

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Bibliographic Info

Article provided by European Finance Association in its journal Review of Finance.

Volume (Year): 17 (2013)
Issue (Month): 2 ()
Pages: 483-525

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Handle: RePEc:oup:revfin:v:17:y:2013:i:2:p:483-525

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Cited by:
  1. Pástor, Luboš & Stambaugh, Robert F. & Taylor, Lucian, 2014. "Scale and Skill in Active Management," CEPR Discussion Papers 9854, C.E.P.R. Discussion Papers.
  2. Breloer, Bernhard & Scholz, Hendrik & Wilkens, Marco, 2014. "Performance of international and global equity mutual funds: Do country momentum and sector momentum matter?," Journal of Banking & Finance, Elsevier, vol. 43(C), pages 58-77.
  3. Soo-Wah Low, 2012. "Market Timing and Selectivity Performance: A Cross-Sectional Analysis of Malaysian Unit Trust Funds," Prague Economic Papers, University of Economics, Prague, vol. 2012(2), pages 205-219.
  4. Bialkowski, Jedrzej & Otten, Roger, 2011. "Emerging market mutual fund performance: Evidence for Poland," The North American Journal of Economics and Finance, Elsevier, vol. 22(2), pages 118-130, August.
  5. Robert F. Stambaugh, 2014. "Investment Noise and Trends," NBER Working Papers 20072, National Bureau of Economic Research, Inc.
  6. Anastasia Petraki & Anna Zalewska, . "With whom and in what is it better to save? Personal pensions in the UK Abstract: This paper studies the relationship between fund and provider characteristics, and fund performance using a sample of ," The Centre for Market and Public Organisation 13/304, Department of Economics, University of Bristol, UK.
  7. Mehri, Meryem, 2014. "The Differential Effects of Law, Culture and Political Risk on Fees, Performance and Risk-Taking Behavior of Islamic and Conventional Funds," Economics Papers from University Paris Dauphine 123456789/13099, Paris Dauphine University.
  8. Herrmann, Ulf & Scholz, Hendrik, 2013. "Short-term persistence in hybrid mutual fund performance: The role of style-shifting abilities," Journal of Banking & Finance, Elsevier, vol. 37(7), pages 2314-2328.

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