How Much Does Size Erode Mutual Fund Performance? A Regression Discontinuity Approach / Jonathan Reuter, Eric Zitzewitz.

Format:

Book

Author/Creator:

Reuter, Jonathan.

Contributor:

National Bureau of Economic Research.

Zitzewitz, Eric.

Series:

Working Paper Series (National Bureau of Economic Research) no. w16329.

NBER working paper series no. w16329

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

The level of diseconomies of scale in asset management has important implications for tests of manager skill and the expected level of performance persistence. To identify the causal impact of fund size on future returns, we exploit the fact that small differences in returns can cause discrete changes in Morningstar ratings that, in turn, generate discrete differences in size. Despite robust evidence that Morningstar ratings increase fund size, our regression discontinuity estimates yield little evidence that fund size erodes returns. Consequently, any downward bias in standard estimates of performance persistence due to diseconomies of scale is likely to be small.

Notes:

Print version record

September 2010.