Another explanation of the mutual fund fee puzzle

May Hu, Chi-Chur Chao and Jin Hao Lim

International Review of Economics & Finance, 2016, vol. 42, issue C, 134-152

Abstract: This paper demonstrates that investor sentiment explains the recent puzzle of the negative relation between fees and before-fee performance of equity mutual funds. Using a composite proxy for investor sentiment, the puzzle can be explained stronger by investor sentiment, compared to the strategic fee-setting explanation discussed in the literature. More-sentiment driven investors would like to select more skilled fund managers, leading to a better future performance in short run. Additionally, when sentiment is high (low), it results in lower (higher) fees. Our results highlight the use of investor sentiment approach in determining mutual fund fees and performance.

Keywords: Investor sentiment; Mutual funds; Fees; Performance (search for similar items in EconPapers)
JEL-codes: G02 G12 G23 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056015001999
Full text for ScienceDirect subscribers only

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:eee:reveco:v:42:y:2016:i:c:p:134-152

DOI: 10.1016/j.iref.2015.11.002

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().