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

Author

Listed:
  • Miguel A. Ferreira

    (ISCTE Business School)

  • António F. Miguel

    (ISCTE Business School)

  • Sofia Ramos

    (ISCTE Business School)

Abstract

This paper studies the performance of mutual funds around the world using a sample of 10,568 open-end actively managed equity funds from 19 countries between 1999 and 2005. Performance is measured using four alternative benchmark models, including an international version of the Cahart four-factor model. We regress abnormal performance on fund attributes such as age, size, fees, management structure, and management tenure. We also investigate whether country characteristics such as economic development, financial development, familiarity, and investor protection have additional explanatory power. The results show that large funds tend to perform better, which suggests the presence of significant economies of scale. When investing abroad, young funds are more able to obtain better performance. Performance is higher in funds with higher fees and that are managed by an individual manager with more experience. Mutual fund performance is better in countries with stronger legal institutions. Domestic funds located in developed countries, in particular with liquid stock markets, perform better. When investing abroad, familiarity and proximity enhances the performance of mutual funds.

Suggested Citation

  • Miguel A. Ferreira & António F. Miguel & Sofia Ramos, 2006. "The Determinants of Mutual Fund Performance: A Cross-Country Study," Swiss Finance Institute Research Paper Series 06-31, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp0631
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    More about this item

    Keywords

    Mutual funds; Performance; Fund attributes; Investor protection;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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