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It's all in the name: Mutual fund name changes after SEC Rule 35d-1

Susanne Espenlaub, Imtiaz ul Haq and Arif Khurshed

Journal of Banking & Finance, 2017, vol. 84, issue C, 123-134

Abstract: We study how investors respond to ‘superficial’ mutual-fund name changes that occur for no fundamental reasons. We find that such name changes remain widespread even after regulation to curb potentially misleading name changes (SEC Rule 35d-1). Superficial changes are more widespread than previously studied ‘misleading’ changes that are not accompanied by corresponding portfolio adjustments reflecting the investment style suggested by the new name. Superficial changes appear to be driven by managerial incentives. Investors react to superficial changes with increased fund flows but appear to gain no benefit through improved performance or lower fees. On the contrary, name-change funds underperform as a group. Our findings highlight inefficiencies in the mutual-fund market and hold important implications for the stakeholders involved.

Keywords: Mutual funds; SEC Rule 35d-1; Name changes; Fund flows (search for similar items in EconPapers)
JEL-codes: G11 G14 G18 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:jbfina:v:84:y:2017:i:c:p:123-134