Fee Structure and Mutual Fund Choice: An Experiment

Mikhail Anufriev, Te Bao, Angela Sutan and Jan Tuinstra

No 45, Working Paper Series from Economics Discipline Group, UTS Business School, University of Technology, Sydney

Abstract: We present a laboratory experiment which is designed to investigate the effect of the fee structure on mutual fund choice. We find that subjects tend to ignore periodic and small operating expenses fees and base their decisions on gross, instead of net, returns. A fee in the form of a, much larger, front-end load leads to lock-in into one of the funds. It is used by some subjects as a commitment device, but exacerbates the decision errors of other subjects. Although past returns do not convey information about future returns, return chasing helps explain subjects' behavior.

Keywords: Mutual fund choice; fee structure; experimental economics; return chasing; learning (search for similar items in EconPapers)
JEL-codes: C91 G02 G11 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2018-06-22
New Economics Papers: this item is included in nep-exp, nep-fmk and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Fee structure and mutual fund choice: An experiment (2019)
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