Abstract
We analyze the performance of Japanese open-type stock mutual funds for the 1981-1992 period. The results show that, regardless of the performance measures and benchmarks employed, most of the Japanese mutual funds underperform the benchmarks by between 3.6% and 1O.8% per annum. These funds tend to invest more in large stocks with low book-to-market ratios. But this feature does not explain the underperformance. A potential explanation is the dilution effect caused by inflows of funds. In Japan, a new investor of an open-type fund only pays in the after-tax value of the net asset value. We conduct a bootstrap experiment to assess the magnitude of this dilution effect.
Original language | English |
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Pages (from-to) | 237-273 |
Number of pages | 37 |
Journal | Review of Financial Studies |
Volume | 10 |
Issue number | 2 |
DOIs | |
Publication status | Published - 1997 |
Externally published | Yes |