IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/19488.html

Financial Intermediaries vs. Capital Allocation: The Forgotten Role of Mutual Funds

Author

Listed:
  • Massa, Massimo
  • Wang, Yanbo
  • Zhang, Hong

Abstract

Recent evidence raises concerns regarding the efficacy of U.S. firms in allocating equity capital to more productive sectors. Can financial intermediaries help achieve better allocation? We document that actively managed U.S. open-end equity mutual funds exhibit significant allocational efficiency, surpassing that of firms or alternative sources (e.g., benchmarks and analyst forecasts). The efficiency gain arises from active capital management by fund managers, implying a novel source of managerial skills that enables funds to deliver superior performance. Our results suggest that financial intermediation conducted by mutual funds plays an important role in helping the market achieve allocational efficiency.

Suggested Citation

  • Massa, Massimo & Wang, Yanbo & Zhang, Hong, 2024. "Financial Intermediaries vs. Capital Allocation: The Forgotten Role of Mutual Funds," CEPR Discussion Papers 19488, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:19488
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP19488
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:19488. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CEPR (email available below). General contact details of provider: https://cepr.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.