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Expense ratios of North American mutual funds

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  • Karen Ruckman

Abstract

The average expense ratio paid by Canadian mutual fund investors is 50% higher than that paid in the United States. This discrepancy is commonly thought to exist because Canadian funds do not take advantage of economies of scale and have less competition. A monopolistic competition framework is used to develop a model for the mutual fund industry. By allowing each fund to have different attributes, the model permits funds to charge different expense ratios in equilibrium and is found to strongly fit the North American mutual fund market. Empirical analysis indicates that these two common explanations and measurable fund attributes account for 24% of the discrepancy.

Suggested Citation

  • Karen Ruckman, 2003. "Expense ratios of North American mutual funds," Canadian Journal of Economics, Canadian Economics Association, vol. 36(1), pages 192-223, February.
  • Handle: RePEc:cje:issued:v:36:y:2003:i:1:p:192-223
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    Citations

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    Cited by:

    1. Douglas Cumming & Sofia Johan, 2013. "The IPO as an exit strategy for venture capitalists: regional lessons from Canada with international comparisons," Chapters,in: Handbook of Research on IPOs, chapter 21, pages 465-502 Edward Elgar Publishing.
    2. Ruckman, Karen, 2004. "Mode of entry mode into a foreign market: the case of U.S. mutual funds in Canada," Journal of International Economics, Elsevier, vol. 62(2), pages 417-432, March.
    3. Cumming, Douglas & Fleming, Grant & Suchard, Jo-Ann, 2005. "Venture capitalist value-added activities, fundraising and drawdowns," Journal of Banking & Finance, Elsevier, vol. 29(2), pages 295-331, February.
    4. repec:eee:quaeco:v:67:y:2018:i:c:p:121-137 is not listed on IDEAS
    5. Rob Bauer & Jeroen Derwall & Rogér Otten, 2007. "The Ethical Mutual Fund Performance Debate: New Evidence from Canada," Journal of Business Ethics, Springer, vol. 70(2), pages 111-124, January.
    6. Douglas Cumming, 2010. "Public policy and the creation of active venture capital markets," Venture Capital, Taylor & Francis Journals, vol. 13(1), pages 75-94, April.
    7. Tang, Ke & Wang, Wenjun & Xu, Rong, 2012. "Size and performance of Chinese mutual funds: The role of economy of scale and liquidity," Pacific-Basin Finance Journal, Elsevier, vol. 20(2), pages 228-246.

    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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