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Product Differentiation Search Costs And Competition In The Mutual Fund Industry
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Book Synopsis Product Differentiation, Search Costs, and Competition in the Mutual Fund Industry by : Ali Hortacsu
Download or read book Product Differentiation, Search Costs, and Competition in the Mutual Fund Industry written by Ali Hortacsu and published by . This book was released on 2010 with total page 65 pages. Available in PDF, EPUB and Kindle. Book excerpt: Two salient features of the competitive structure of the U.S. mutual fund industry are the large number of funds and the sizeable dispersion in the fees funds charge investors, even within narrow asset classes. Portfolio financial performance differences alone do not seem able to fully explain these features. We investigate whether non-portfolio fund differentiation and information/search frictions also play a role in creating these observed industry characteristics. We focus on their impact in a case study of the retail Samp;P 500 index funds sector. We find that fund proliferation and price dispersion also exist in this sector, despite the funds' financial homogeneity. Furthermore, there was a marked shift in sector assets to more expensive (often newly entered) funds throughout our sample period. Our analysis indicates that these observations are consistent with the presence of both non-portfolio differentiation and information/search frictions. Structural estimation of a novel search-over-differentiated-products model reveals that reasonable magnitudes of investor search costs can explain the considerable price dispersion in the sector, and consumers seem to value funds'' observable attributes such as fund age and the number of other funds in the same fund family in largely plausible ways. The results also suggest that the substantial increase in mutual fund market participation observed during our sample, and the corresponding purchase decisions of novice investors, drove the shift in assets toward more expensive funds. We also find evidence consistent with the presence of switching costs, as distinct from search costs. Using structural estimates of demand parameters and search costs, we investigate the possibility that there are too many sector funds from a social welfare standpoint. The results of this exercise indicate that restricting entry would yield nontrivial gains from reduced search costs and productivity gains from scale economies, but these may be counterbalanced by losses from increased market power and reduced product variety.
Book Synopsis Product Differentiation, Search Costs, and Competition in the Mutual Fund Industry by :
Download or read book Product Differentiation, Search Costs, and Competition in the Mutual Fund Industry written by and published by . This book was released on 2003 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Product Differentiation, Search Costs, and Competition in the Mutual Fund Industri by : Ali Hortaçsu
Download or read book Product Differentiation, Search Costs, and Competition in the Mutual Fund Industri written by Ali Hortaçsu and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Product Differentiation, Search Cots and Competition in the Mutual Fund Industry by : Ali Hortaçsu
Download or read book Product Differentiation, Search Cots and Competition in the Mutual Fund Industry written by Ali Hortaçsu and published by . This book was released on 2003 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Mutual Fund Industry by : R. Glenn Hubbard
Download or read book The Mutual Fund Industry written by R. Glenn Hubbard and published by Columbia University Press. This book was released on 2010 with total page 254 pages. Available in PDF, EPUB and Kindle. Book excerpt: Mutual funds form the bedrock of retirement savings in the United States, and, considering their rapid growth over recent decades, are sure to become even more financially critical in the coming decades. Because the size of fees paid by investors to mutual fund advisers can strongly affect the return on investment, these fees have become contentious in Congress and the courts, with many arguing that investment advisers grow rich at the expense of investors. This groundbreaking book not only conceptualizes a new economic model for the industry but uses this model to test price competition between investment advisers. Its highly experienced authors track the growth of the industry over the past twenty-five years and present the arguments and evidence both for and against theories of adviser malfeasance, as well as the assertion that market forces fail to protect investors' returns from excessive fees. The volume briefly reviews the regulatory history of mutual fund fees and leading case decisions addressing excessive fees. It also reveals the extent to which the governance structure of mutual funds impacts fund performance. There is no greater text for those who seek to understand today's mutual fund industry, including investors, money managers, fund directors, securities lawyers, economists, and those concerned with regulatory policy toward mutual funds
Book Synopsis The Mutual Fund Industry by : R. Glenn Hubbard
Download or read book The Mutual Fund Industry written by R. Glenn Hubbard and published by Columbia University Press. This book was released on 2010-04-01 with total page 252 pages. Available in PDF, EPUB and Kindle. Book excerpt: Mutual funds form the bedrock of retirement savings in the United States, and, considering their rapid growth, are sure to be more critical in the future. Because the size of fees paid by investors to mutual fund advisers can strongly affect the return on investment, these fees have become a contentious issue in Congress and the courts, with many arguing that investment advisers grow rich at the expense of investors. This ground-breaking book not only conceptualizes a new economic model of the mutual fund industry, but also uses this model to test for price competition between investment advisers, evaluating the assertion that market forces fail to protect investors' returns from excessive fees. Highly experienced authors track the growth of the industry over the past twenty-five years and present arguments and evidence both for and against theories of adviser malfeasance. The authors review the regulatory history of mutual fund fees and summarize leading case decisions addressing excessive fees. Revealing the extent to which the governance structure of mutual funds truly impacts fund performance, this book provides the best understanding of today's mutual fund industry and is a vital tool for investors, money managers, fund directors, securities lawyers, economists, and anyone concerned with the regulation of mutual funds.
Book Synopsis Conflicts of Interest and Competition in the Mutual Fund Industry by : Ajay Khorana
Download or read book Conflicts of Interest and Competition in the Mutual Fund Industry written by Ajay Khorana and published by . This book was released on 2011 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Mutual fund investors generally desire high risk-adjusted performance at low cost, which is not necessarily the objective of fund families. Fund families generally want to maximize assets under management (i.e., their market share) and the resulting management fees. This paper examines how these conflicting objectives affect competition and investor behavior in the mutual fund industry for the universe of U.S. mutual fund families over the period 1979-1998. Over this period, industry assets increased by a factor of twenty, the number of active fund families tripled, and the average market share of a family declined by two thirds. We find that price competition is important in the industry. Families that charge lower fees than the competition gain market share, but only if these fees are above average to begin with. Low-cost families do not lose market share by charging higher fees. In addition, fees charged explicitly for marketing and distribution (12b-1 fees) have a positive impact on market share. We find no evidence that investors derive any benefit from 12b-1 fees. Product differentiation strategies are also effective in obtaining market share. Families that perform better, and start more funds relative to the competition (a measure of innovation) have a higher market share. Innovation is rewarded more if the new fund is more differentiated from existing offerings and is in a less crowded objective. Finally, market share within an investment objective is driven primarily by a family's policies within that objective, but there are important performance spillover effects from other funds in the family. Our findings are robust to various tests for endogeneity of the explanatory variables. Overall, this paper highlights a number of conflicts between fund families and investors.
Download or read book Pooling Money written by Yasuyuki Fuchita and published by Brookings Institution Press. This book was released on 2010-01-01 with total page 151 pages. Available in PDF, EPUB and Kindle. Book excerpt: A Brookings Institution Press and Nomura Institute of Capital Markets Research publication One of the first rules of investing is diversification: spreading resources over many types of investments in order to minimize financial risk. Mutual funds have been the diversification vehicle of choice for the last several decades. In recent years, however, other opportunities for diversification—such as separately managed accounts and exchange-traded funds—have enjoyed rapid growth. What lies ahead for the mutual fund industry in light of this increasingly competitive environment? In this volume, experts from the United States and Japan look at forces of change in their securities markets and offer their views of the future for mutual funds and other forms of securities diversification. Contributors include Harold Bradley (Kauffman Foundation), Koichi Iwai (Nomura Institute of Capital Markets Research),Ajay Khorana (Georgia Institute of Technology),Allan Mostoff (Mutual Fund Directors Forum), Brian Reid (Investment Company Institute), Henri Servaes (London Business School), Paula Tkac (Federal Reserve Bank of Atlanta), and Peter Wallison (American Enterprise Institute).
Book Synopsis Impact of Competition on Fund Disclosures and Consumer Search Costs by : Sitikantha Parida
Download or read book Impact of Competition on Fund Disclosures and Consumer Search Costs written by Sitikantha Parida and published by . This book was released on 2018 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the impact of competition in financial markets on the frequency of portfolio disclosures by mutual funds and its implications for consumer search costs. In a sample of open-end US domestic equity funds, it finds that voluntary disclosures decrease with market competition and this effect is amplified for funds holding illiquid assets. These results provide empirical support for the findings of Carlin et al. (2102). Mutual funds use voluntary portfolio disclosures as a marketing tool to attract new investments in a tournament-like market, where superior relative performance and greater visibility are rewarded with convex payoffs. With higher competition, the likelihood of receiving new investments goes down for each fund and funds respond by reducing costly voluntary disclosures. The disclosure costs are higher for funds holding illiquid assets and hence, the effect is stronger for them. Thus, competition appears to have an adverse impact on market transparency and hence, on consumer search costs in a tournament-like mutual fund market.
Book Synopsis Price Competition in the Mutual Fund Industry by : Sitikantha Parida
Download or read book Price Competition in the Mutual Fund Industry written by Sitikantha Parida and published by . This book was released on 2017 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We find a puzzling fact about the mutual fund industry that funds operating in more competitive segments charge higher fees. We argue that this surprising positive relation between competition and fund fees is consistent with strategic fee setting by funds. Fund performance is better and more persistent in less competitive segments, which attracts relatively more performance-sensitive investors. This leaves relatively less performance-sensitive investors in more competitive markets. Hence, funds operating in more competitive markets face a relatively inelastic demand curve and take advantage of it by increasing their fees (which reduces investors' net returns). Our findings have important policy implications that market competition on its own may not be sufficient to decrease the fund fees and that regulatory interventions are required to increase investor awareness of mutual fund fees and their adverse impacts on net fund performance.
Book Synopsis Competition in the Mutual Fund Industry by : John C. Coates
Download or read book Competition in the Mutual Fund Industry written by John C. Coates and published by . This book was released on 2007 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Since 1960 the mutual fund industry has grown from 160 funds and $18 billion in assets under management to over 8,000 funds with $10.4 trillion in assets. Yet critics, including Yale Chief Investment Officer David Swensen, Vanguard founder Jack Bogle, and New York Governor Eliot Spitzer, call for more fund regulation, claiming that competition has not protected investors from excessive fees. Starting in 2003, the number of class action suits against fund advisors increased sharply, and, consistent with critics' views, some courts have excluded or treated skeptically evidence of competition and comparable fees of other funds. Skepticism about fund competition dates to the 1960s, when the SEC accepted the view that market forces fail to constrain advisory fees, in part because fund boards rarely fire advisors. In this article, we show that economic theory, empirical evidence, and careful analysis of the laws and institutions that shape mutual funds refute this view. Fund critics overlook the most salient characteristic of a mutual fund, redeemable shares. While boards rarely fire advisors, fund investors may fire advisors at any time by redeeming shares and switching into other investments. Industry concentration is low, new entry is common, barriers to entry are low, and empirical studies -- including new evidence presented in this article -- show higher advisory fees significantly reduce fund market shares, and so constrain fees. Fund performance is consistent with competition exerting a strong disciplinary force on funds and fees. Our findings lead us to reject the critics' views in favor of the legal framework established by ʹ36(b) of the Investment Company Act and the lead case interpreting that law (the Gartenberg decision), while suggesting Gartenberg is best interpreted to allow the introduction of evidence regarding competition between funds"--Preface.
Book Synopsis Quality and Product Differentiation by : Maxime Bonelli
Download or read book Quality and Product Differentiation written by Maxime Bonelli and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Competition in the Mutual Fund Industry by : Coates, IV (John C.)
Download or read book Competition in the Mutual Fund Industry written by Coates, IV (John C.) and published by . This book was released on 2011 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: Since 1960 the mutual fund industry has grown from 160 funds and $18 billion in assets under management to over 8,000 funds with $10.4 trillion in assets. Yet critics - including Yale Chief Investment Officer David Swensen, Vanguard founder Jack Bogle, and New York Governor Eliot Spitzer - call for more fund regulation, claiming that competition has not protected investors from excessive fees. Starting in 2003, the number of class action suits against fund advisors increased sharply, and, consistent with critics' views, some courts have excluded or treated skeptically evidence of competition and comparable fees of other funds. Skepticism about fund competition dates to the 1960s, when the SEC accepted the view that market forces fail to constrain advisory fees, in part because fund boards rarely fire advisors. In this article, we show that economic theory, empirical evidence, and careful analysis of the laws and institutions that shape mutual funds refute this view. Fund critics overlook the most salient characteristic of a mutual fund: redeemable shares. While boards rarely fire advisors, fund investors may fire advisors at any time by redeeming shares and switching into other investments. Industry concentration is low, new entry is common, barriers to entry are low, and empirical studies - including new evidence presented in this article - show higher advisory fees significantly reduce fund market shares, and so constrain fees. Fund performance is consistent with competition exerting a strong disciplinary force on funds and fees. Our findings lead us to reject the critics' views in favor of the legal framework established by sect;36(b) of the Investment Company Act and the lead case interpreting that law (the Gartenberg decision), while suggesting Gartenberg is best interpreted to allow the introduction of evidence regarding competition between funds.
Book Synopsis Price-directed Search, Product Differentiation and Competition by : Martin Obradovits
Download or read book Price-directed Search, Product Differentiation and Competition written by Martin Obradovits and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Especially in many online markets, consumers can readily observe prices, but may need to further inspect products to assess their suitability. We study the effects of product differentiation and search costs on competition and market outcomes in a tractable model of price-directed consumer search. We find that (i) firms' equilibrium pricing always induces efficient search behavior, (ii) for relatively large product differentiation, welfare distortions still occur because some consumers (may) forgo consumption, and (iii) lower search costs lead to stochastically higher prices, increasing firms' expected profits and decreasing their frequency of sales. Consumer surplus often falls when search costs decrease.
Book Synopsis Mutual Fund Industry Competition and Concentration by : Miguel A. Ferreira
Download or read book Mutual Fund Industry Competition and Concentration written by Miguel A. Ferreira and published by . This book was released on 2009 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines mutual fund industry competition and concentration in 27 countries using a sample of almost 50,000 mutual funds. The indicators show that the mutual fund industry is concentrated worldwide and some industries present large fund complexes. Countries with common law and higher stock market turnover are associated with low level industry concentration. There is more industry contestability in countries with better quality of institutions and where regulation is more open. Bank concentration and simultaneous restrictions to engage new activities in the financial industry tend to decrease firm entry in the mutual fund industry. The launch of new funds is positively related with openness of regulation and negatively related with industry age. The overall level of fees tend to be higher in countries with low stock market turnover, where industry size is smaller and where foreign mutual fund companies have a larger market share. Moreover, fund proliferation seems to be an important aspect of competition as it is negatively related with mutual fund fees. Overall, the results do not indicate a direct relation between competition and concentration, similar to the findings for the banking industry. Nevertheless, our evidence validates the contention that the degree of competition is important for the variety of products as we find a larger offer of funds in more competitive industries.
Book Synopsis Industrial Dynamics and the Evolution of Markets in the Mutual Fund Industry by : Andreas Mattig
Download or read book Industrial Dynamics and the Evolution of Markets in the Mutual Fund Industry written by Andreas Mattig and published by Springer Science & Business Media. This book was released on 2010-12-01 with total page 248 pages. Available in PDF, EPUB and Kindle. Book excerpt: The asset management, and more specifically the mutual fund industry, is facing major strategic challenges. Although the market is growing overall, its growth attracts a steady stream of new entrants and new products that jeopardize the position and profitability of (large) incumbent firms. In order to cope with this setting, Andreas Mattig focuses on a holistic market model to sketch the mutual fund industry structure. This allows to propose a new measurement approach and to track the industrial dynamics. Based on these theoretical contributions, he concentrates on governance aspects and moulds the results into a practice-oriented strategic framework.
Book Synopsis Handbook of Game Theory and Industrial Organization, Volume II by : Luis C. Corchón
Download or read book Handbook of Game Theory and Industrial Organization, Volume II written by Luis C. Corchón and published by Edward Elgar Publishing. This book was released on 2018-02-23 with total page 547 pages. Available in PDF, EPUB and Kindle. Book excerpt: This second volume of the Handbook includes original contribution by experts in the field. It provides up-to-date surveys of the most relevant applications of game theory to industrial organization. The book covers both classical as well as new IO topics such as mergers in markets with homogeneous and differentiated goods, leniency and coordinated effects in cartels and mergers, static and dynamic contests, consumer search and product safety, strategic delegation, platforms and network effects, auctions, environmental and resource economics, intellectual property, healthcare, corruption, experimental industrial organization and empirical models of R&D.
