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Determinants of cost efficiencies in the mutual fund industry

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  • D.K. Malhotra
  • Rand Martin
  • Philip Russel

Abstract

We evaluate determinants of cost efficiencies in the U.S. mutual fund industry for 1998–2003. Our empirical results show that cost increases in this industry have been less than proportional to increases in assets. We find that funds without a 12b‐1 plan show larger economies of scale than funds with a 12b‐1 plan; institutional funds show greater economies of scale than do retail funds; and that fund families that are more focused in their investment objectives reap benefits of lower fund management costs than do fund families that are more diversified in their investment objectives.

Suggested Citation

  • D.K. Malhotra & Rand Martin & Philip Russel, 2007. "Determinants of cost efficiencies in the mutual fund industry," Review of Financial Economics, John Wiley & Sons, vol. 16(4), pages 323-334.
    • Handle: RePEc:wly:revfec:v:16:y:2007:i:4:p:323-334
    DOI: 10.1016/j.rfe.2006.08.002
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    References listed on IDEAS

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    1. D. K. Malhotra & Robert W. McLeod, 1997. "An Empirical Analysis Of Mutual Fund Expenses," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 20(2), pages 175-190, June.
    2. Erik R. Sirri & Peter Tufano, 1998. "Costly Search and Mutual Fund Flows," Journal of Finance, American Finance Association, vol. 53(5), pages 1589-1622, October.
    3. Malhotra, D K & McLeod, Robert W, 1997. "An Empirical Analysis of Mutual Fund Expenses," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 20(2), pages 175-190, Summer.
    4. Brad M. Barber & Terrance Odean & Lu Zheng, 2005. "Out of Sight, Out of Mind: The Effects of Expenses on Mutual Fund Flows," The Journal of Business, University of Chicago Press, vol. 78(6), pages 2095-2120, November.
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    Cited by:

    1. Samar Farid & Hayam Wahba, 2022. "The effect of fund size on mutual funds performance in Egypt," Future Business Journal, Springer, vol. 8(1), pages 1-11, December.

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