Are mutual fund investors in jail?

Carlos Alves and Victor Mendes

Applied Financial Economics, 2007, vol. 17, issue 16, pages 1301-1312

Abstract: The absence of investor reaction to the poor performance of mutual funds is a widely reported phenomenon. This article investigates the role of load costs as an explanation for the phenomenon and concludes that back-end load fees are an obstacle to reaction. We found evidence consistent with the hypothesis that medium and long-term investors do not react to poor performances due to the fact that they are 'imprisoned' by back-end load fees.

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