Should investors choose funds from focused families?

Authors

  • Conrad S. Ciccotello Department of Risk Management and Insurance, J. Mack Robinson School of Business, Georgia State University
  • James A. Miles Department of Finance, Smeal College of Business Administration, Pennsylvania State University
  • Lori S. Walsh U.S. Securities and Exchange Commission, Washington, DC

DOI:

https://doi.org/10.61190/fsr.v15i3.4861

Keywords:

Specialization, Family, Mutual fund

Abstract

This paper finds evidence consistent with a separating equilibrium where high search cost investors choose mutual fund families that offer a broad product array, while low search cost investors find it most efficient to allocate their resources across families focused in a particular product line. Consid­ ering both security research and distribution efficiencies, we find that focused families offer investors about a 50 basis point annual advantage in domestic equity funds over our period of study. Innovations in distribution, such as fund supermarkets, as well as financial advice priced below the breakeven threshold, can lever the benefits of family focus.

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Published

2006-09-30

Issue

Vol. 15 No. 3 (2006): FSR Fall 2006

Section

New Original Submission

License

Copyright (c) 2006 Academy of Financial Services

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This license allows the author to remix, tweak, and build upon the original work non-commercially. The new work(s) must be non-commercial and acknowledge the original work.

How to Cite

Should investors choose funds from focused families?. (2006). Financial Services Review, 15(3), 247-264. https://doi.org/10.61190/fsr.v15i3.4861