Fee complexity and investor mistakes in retail financial markets
Mutual funds sold via brokers offer fund portfolios that investors can purchase in one of three classes: A, B or C. These classes are distinguished only by their fee schedules and thus have different net performance results. An analysis of relative class performances for a set of U.S mutual funds be...
| मुख्य लेखक: | |
|---|---|
| स्वरूप: | Journal article |
| भाषा: | English |
| प्रकाशित: |
World Scientific Publishing
2020
|
| _version_ | 1826270528066813952 |
|---|---|
| author | Kahraman, B |
| author_facet | Kahraman, B |
| author_sort | Kahraman, B |
| collection | OXFORD |
| description | Mutual funds sold via brokers offer fund portfolios that investors can purchase in one of three classes: A, B or C. These classes are distinguished only by their fee schedules and thus have different net performance results. An analysis of relative class performances for a set of U.S mutual funds between 1992 and 2008 reveals a striking fact about class B: while classes A and C provide the best performance results at long and short holding periods, respectively, class B is dominated by either class A or C at any holding period. The inferiority yet popularity of class B at first suggests that naïve investors who do not understand the fee schedule of this class are being exploited. However, I propose two hypothetical clienteles which might rationally demand class B shares: one (a) with uncertain holding periods, or one (b) that desires to have long holding periods but is unable to commit to them. I identify whether investors rationally or naïvely purchase class B by examining the flow-fee sensitivity and estimating investor holding periods. My results support the naïve investor explanation. |
| first_indexed | 2024-03-06T21:42:13Z |
| format | Journal article |
| id | oxford-uuid:485285bf-8153-49a4-9e4f-420c1d8f1c67 |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-06T21:42:13Z |
| publishDate | 2020 |
| publisher | World Scientific Publishing |
| record_format | dspace |
| spelling | oxford-uuid:485285bf-8153-49a4-9e4f-420c1d8f1c672022-03-26T15:25:06ZFee complexity and investor mistakes in retail financial marketsJournal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:485285bf-8153-49a4-9e4f-420c1d8f1c67EnglishSymplectic ElementsWorld Scientific Publishing2020Kahraman, BMutual funds sold via brokers offer fund portfolios that investors can purchase in one of three classes: A, B or C. These classes are distinguished only by their fee schedules and thus have different net performance results. An analysis of relative class performances for a set of U.S mutual funds between 1992 and 2008 reveals a striking fact about class B: while classes A and C provide the best performance results at long and short holding periods, respectively, class B is dominated by either class A or C at any holding period. The inferiority yet popularity of class B at first suggests that naïve investors who do not understand the fee schedule of this class are being exploited. However, I propose two hypothetical clienteles which might rationally demand class B shares: one (a) with uncertain holding periods, or one (b) that desires to have long holding periods but is unable to commit to them. I identify whether investors rationally or naïvely purchase class B by examining the flow-fee sensitivity and estimating investor holding periods. My results support the naïve investor explanation. |
| spellingShingle | Kahraman, B Fee complexity and investor mistakes in retail financial markets |
| title | Fee complexity and investor mistakes in retail financial markets |
| title_full | Fee complexity and investor mistakes in retail financial markets |
| title_fullStr | Fee complexity and investor mistakes in retail financial markets |
| title_full_unstemmed | Fee complexity and investor mistakes in retail financial markets |
| title_short | Fee complexity and investor mistakes in retail financial markets |
| title_sort | fee complexity and investor mistakes in retail financial markets |
| work_keys_str_mv | AT kahramanb feecomplexityandinvestormistakesinretailfinancialmarkets |