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Are mutual fund investors in jail?

Carlos Alves () and Victor Mendes ()

FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: The absence of investor reaction to the poor performance of mutual funds is a widely reported phenomenon. This paper 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 find that investors with a high likelihood of undergoing a liquidity crisis, preferring liquidity in decision making, act contrary to the reaction hypothesis, and investors with broader investment horizons do not react to poor performances due to the fact that they are “imprisoned” by back-end load fees.

Keywords: Mutual Fund; Performance Reaction; Load Costs; Investor Behaviour (search for similar items in EconPapers)
JEL-codes: G20 G23 G28 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2006-02
New Economics Papers: this item is included in nep-fin and nep-fmk
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Citations: View citations in EconPapers (2) Track citations by RSS feed

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Journal Article: Are mutual fund investors in jail? (2007) Downloads
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