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The Economics of Mutual Funds


  • David K. Musto

    () (Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104)


This review surveys the literature on the economics of mutual funds in general, and open-end mutual funds in particular. This mutual fund design has been very successful, though it carries risks that have recently been realized at large scales. It also frustrates the analysis of performance in ways only recently appreciated. Among the topics reviewed are tax efficiency, transactions costs, risk shifting, window dressing, governance, marketing, price setting, and concerns that arise at the family level.

Suggested Citation

  • David K. Musto, 2011. "The Economics of Mutual Funds," Annual Review of Financial Economics, Annual Reviews, vol. 3(1), pages 159-172, December.
  • Handle: RePEc:anr:refeco:v:3:y:2011:p:159-172

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    References listed on IDEAS

    1. Buraschi, Andrea & Jiltsov, Alexei, 2005. "Inflation risk premia and the expectations hypothesis," Journal of Financial Economics, Elsevier, vol. 75(2), pages 429-490, February.
    2. Robin Greenwood & Dimitri Vayanos, 2010. "Price Pressure in the Government Bond Market," American Economic Review, American Economic Association, vol. 100(2), pages 585-590, May.
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    More about this item


    mutual funds; open-end; fund flows; consumer investment; expense ratios;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure


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