IDEAS home Printed from https://ideas.repec.org/h/wsi/wschap/9789814335409_0007.html
   My bibliography  Save this book chapter

Another Puzzle: The Growth in Actively Managed Mutual Funds

In: Investments And Portfolio Performance

Author

Listed:
  • MARTIN J. GRUBER

    (New York University, USA)

Abstract

Mutual funds represent one of the fastest growing type of financial intermediary in the American economy. The question remains as to why mutual funds and in particular actively managed mutual funds have grown so fast, when their performance on average has been inferior to that of index funds. One possible explanation of why investors buy actively managed open end funds lies in the fact that they are bought and sold at net asset value, and thus management ability may not be priced. If management ability exists and it is not included in the price of open end funds, then performance should be predictable. If performance is predictable and at least some investors are aware of this, then cash flows into and out of funds should be predictable by the very same metrics that predict performance. Finally, if predictors exist and at least some investors act on these predictors in investing in mutual funds, the return on new cash flows should be better than the average return for all investors in these funds. This article presents empirical evidence on all of these issues and shows that investors in actively managed mutual funds may have been more rational than we have assumed.

Suggested Citation

  • Martin J. Gruber, 2010. "Another Puzzle: The Growth in Actively Managed Mutual Funds," World Scientific Book Chapters, in: Edwin J Elton & Martin J Gruber (ed.), Investments And Portfolio Performance, chapter 7, pages 117-144, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814335409_0007
    as

    Download full text from publisher

    File URL: https://www.worldscientific.com/doi/pdf/10.1142/9789814335409_0007
    Download Restriction: Ebook Access is available upon purchase.
    File URL: https://www.worldscientific.com/doi/abs/10.1142/9789814335409_0007
    Download Restriction: Ebook Access is available upon purchase.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jakša Cvitanić & Julien Hugonnier, 2022. "Optimal fund menus," Mathematical Finance, Wiley Blackwell, vol. 32(2), pages 455-516, April.
    2. Božović, Miloš, 2022. "Recent evidence on the short-term and long-term performance persistence of emerging-market mutual fund returns," The North American Journal of Economics and Finance, Elsevier, vol. 62(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:wschap:9789814335409_0007. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscientific.com/page/worldscibooks .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.