Threshold Effect of Scale and Skill in Active Mutual Fund Management

Terence Tai Leung Chong, Nayoung Lee and Chan-Ip Sio

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, we apply threshold estimation techniques to study the size-performance relation in the US mutual fund industry. The existing studies have found diseconomies scale, and we add our contribution to this by considering possible non-linear decreasing returns to scale caused by fund age and manager tenure. We find significant threshold effects of both fund age and manager tenure at approximately three to four years in the size-performance relation. Compared with younger funds, older funds have severe decreasing returns to scale as the industry size increases.

Keywords: Active mutual funds management; Returns to scale; Threshold estimation (search for similar items in EconPapers)
JEL-codes: C24 G11 G23 J24 (search for similar items in EconPapers)
Date: 2018-07-30
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https://mpra.ub.uni-muenchen.de/92075/1/MPRA_paper_92075.pdf original version (application/pdf)

Related works:
Journal Article: Threshold effect of scale and skill in active mutual fund management (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:92075

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