Diseconomies of Scale in the Actively-Managed Mutual Fund Industry: Fund Industry: What Do the Outliers in the Data Tell Us?: A Response

Harrison Hong and Wenxi Jiang

Critical Finance Review, 2018, vol. 7, issue 2, 373-377

Abstract: Adams et al. (2018) point out that outliers might be driving the negative relationship between fund size and performance in chen et al. (2004). These outliers are due to style misclassifications in the 2004 CRSP Mutual Fund Database. They propose robust regressions to remove outliers. We point out that the ideal way to address this issue is simply to clean up these style misclassifications as recent papers in the literature have done. Removing outliers can skew inference if small (large) funds have positively (negatively) skewed returns due to diseconomies of scale. We show that after cleaning up style misclassifications, the negative relationship between fund size and performance remains robust regardless of estimation strategies.

JEL-codes: G10 G11 G12 (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1561/104.00000066 (application/xml)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:now:jnlcfr:104.00000066

Access Statistics for this article

More articles in Critical Finance Review from now publishers
Bibliographic data for series maintained by Lucy Wiseman ().