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The Japanese Open-End Fund Puzzle

  • Stephen J. Brown
  • William N. Goetzmann
  • Takato Hiraki
  • Toshiyuki Otsuki
  • Noriyoshi Shiraishi

Recent empirical evidence has suggested that the Japanese mutual fund industry has" underperformed dramatically over the past two decades. Conjectured reasons for" underperformance range from tax-dilution effects to high fees, high turnover and poor asset" management. In this paper, we show that this underperformance is largely due to tax-dilution" effects, and not necessarily to poor management. Using a broad database of funds which" includes investment trusts closed to new investment, we show that once an instrument for the" time-varying tax-dilution exposure is included in a factor model, there is little evidence of poor" risk-adjusted performance. A style analysis of the industry demonstrates that managers appear to" pursue tax-driven dynamic strategies.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6347.

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Date of creation: Jan 1998
Date of revision:
Publication status: published as Brown, Stephen J, et al, 2001. "The Japanese Open-End Fund Puzzle," Journal of Business, University of Chicago Press, vol. 74(1), pages 59-77, January.
Handle: RePEc:nbr:nberwo:6347
Note: AP
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