T he number of mutual funds has grown dramatically in recent years. The Financial Research Corporation data base, the source of data for this article, lists 7,734 distinct mutual fund portfolios. Mutual funds are now the preferred way for individual investors and many institutions to participate in the capital markets, and their popularity has increased demand for evaluations of fund performanc...

I present a model that can transform discounts on closed-end mutual funds into a measure of investor sentiment about the ability of fund managers to beat the market. It is demonstrated that this measure of sentiment varies positively with capital flows into open-end mutual funds, which are actively managed, and negatively with capital flows into index funds, which are passively managed. This is...

I present a model that can transform discounts on closed-end mutual funds into a measure of investor sentiment about the ability of fund managers to beat the market. This measure of sentiment varies positively with capital flows into actively managed open-end mutual funds, but negatively with capital flows into passively managed index funds. Investors appear to re-allocate their portfolios betw...

Our investment strategy for the world mutual funds can be divided into three main parts. First, the global trend indicator (GTI) is defined for evaluating the price change trend of the funds in the future. Then, based on GTI, we derive the monitoring indicator (MI) to measure whether the fund market is in the bull or bear state. Finally, to decide the signal for buying or selling funds, a genet...

We examine changes in equity mutual funds’’ investment advisory contracts. There are substantial advisory compensation rate changes in both directions, with typical percentage rate shifts exceeding one-fourth. We find that rate increases are associated with superior past marketadjusted performance, whereas rate decreases reflect economies of scale associated with growth, and are not associated ...

Although the 1940 Act restricts interfund lending within a mutual fund family, families can apply for regulatory exemptions to participate in interfund lending. We find that heterogeneity in portfolio liquidity and investor flows across funds, funds’ investment restrictions, and governance mechanisms influence the fund family’s decision to apply for interfund lending. We document several costs ...

We test the hypothesis that investment in actively managed mutual funds is linked to investor clienteles. We document that individual investors located in less affluent, less educated, and ethnic minority neighborhoods invest more in funds with expensive load fees. They also tend to invest a disproportionate amount in funds with no minimum-balance requirements, and find fewer funds and (fewer n...

normal today. The 1960 volume of the Financial Analysts Journal contains a pair of remarkable articles. In the first, “The Case for an Unmanaged Investment Company,” Edward Renshaw and Paul Feldstein compared the returns of mutual funds to those of the DJIA and found that only 11 of 89 diversified common stock and balanced funds had returns higher than those of the DJIA. This and similar eviden...

We show that the persistent use of momentum investment strategies by mutual funds has important implications for the performance persistence and survivorship bias controversies. Using mutual fund portfolio holdings from a database free of survivorship bias, we ̄nd that the best performing funds during one year are the best performers during the following year, with the exception of 1981, 1983, ...