Mutual Fund Trading Costs and Diseconomies of Scale

• Main Authors: Busse, Jeffrey, Chordia, Tarun, JIANG, Lei, TANG, Yuehua
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2017
• Subjects: Mutual funds; transaction costs; fund size; stock size; fund performance; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/4536; https://ink.library.smu.edu.sg/context/lkcsb_research/article/5535/viewcontent/SSRN_id2350583.pdf
• Institution: Singapore Management University

Larger mutual funds underperform smaller funds even though they have lower percentage transaction costs. Larger funds hold and trade a larger fraction of bigger, more liquid stocks, which leads to lower percentage transaction costs than smaller funds. Smaller funds outperform larger funds primarily...