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Does Mutual Fund Size Matter? The Relationship Between Size and Performance

Author

Listed:
  • Edwin J. Elton
  • Martin J. Gruber
  • Christopher R. Blake

Abstract

Berk and Green (2004) make a theoretical argument that performance persistence should not exist since new money flows into well-performing mutual funds and there are diseconomies of scale, or because successful funds capture excess returns by raising fees. We find that performance prediction continues when we examine samples of larger and larger funds and that past performance predicts future performance for holding periods up to three years. Funds that outperform index funds of the same risk can be identified. We find that expense ratios are lower for large funds, and decrease as funds get larger or perform well.

Suggested Citation

  • Edwin J. Elton & Martin J. Gruber & Christopher R. Blake, 2012. "Does Mutual Fund Size Matter? The Relationship Between Size and Performance," The Review of Asset Pricing Studies, Society for Financial Studies, vol. 2(1), pages 31-55.
    • Handle: RePEc:oup:rasset:v:2:y:2012:i:1:p:31-55.
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    File URL: http://hdl.handle.net/10.1093/rapstu/ras001
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    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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