Mutual fund performance, management behavior, and investor costs

Abstract

We examine pure no-load funds over a 5-year period. For equity funds, trading activity 1s negatively related to returns. Expense ratios are not significantly related to returns. Potential capital gains exposure and tax cost ratio arc positively related to return. For fixed income funds, trading activity is positively related to return. Expense ratios and tax cost ratios are negatively related to returns. Mutual funds exhibit economies of scale and managers experience scale and scope economics. The individual investor is better off in a large fund that is a member of a large fund family.