@article{cffef60cc69243c2a20d1cb1afc9bde6,
title = "Market frictions, investor sophistication, and persistence in mutual fund performance",
abstract = "We extend the model of Berk and Green (2004) to investigate the impact of two frictions, search costs and financial constraints, on mutual fund performance. Our model predicts the survival of underperforming funds and delivers two new predictions: 1) differences in performance across funds are likely to persist; and 2) mutual funds targeted to less sophisticated investors should exhibit higher dispersion in expected performance. Using data on U.S. domestic diversified equity mutual funds we find empirical support for these predictions.",
keywords = "Investor sophistication, Market frictions, Mutual fund performance persistence",
author = "A. Dumitrescu and Javier Gil-Bazo",
note = "Funding Information: The authors thank the editor, Tarun Chordia, and an anonymous referee, as well as Ioana Schiopu, Calin Arcalean, Ramiro Losada, Bill Zu, Juan-Pedro Gomez, Francesco Consonni, Florinda Silva, and seminar participants at ESADE Business School, Universitat Pompeu Fabra, Universidad Carlos III, 2012 Annual Meeting of the Academy of Behavioral Finance and Economics, 2012 European Summer Symposium in Financial Markets (Gerzensee), VIII Workshop in Public Policy Design (Universitat de Girona), 2013 Finance Forum, 2013 Midwest Finance Association Conference, and 2014 European Financial Management Association Meeting, for helpful comments and suggestions. All remaining errors are the authors' responsibility. The authors also acknowledge financial support from the Government of Spain (grants ECO2011-24928, ECO2014-55488-P, PR2015-00645, and PR2015-00606), the Government of Catalonia (grants 2014-SGR-1079 and 2014-SGR-549), Bank Sabadell, and La Caixa Foundation . Funding Information: The authors thank the editor, Tarun Chordia, and an anonymous referee, as well as Ioana Schiopu, Calin Arcalean, Ramiro Losada, Bill Zu, Juan-Pedro Gomez, Francesco Consonni, Florinda Silva, and seminar participants at ESADE Business School, Universitat Pompeu Fabra, Universidad Carlos III, 2012 Annual Meeting of the Academy of Behavioral Finance and Economics, 2012 European Summer Symposium in Financial Markets (Gerzensee), VIII Workshop in Public Policy Design (Universitat de Girona), 2013 Finance Forum, 2013 Midwest Finance Association Conference, and 2014 European Financial Management Association Meeting, for helpful comments and suggestions. All remaining errors are the authors? responsibility. The authors also acknowledge financial support from the Government of Spain (grants ECO2011-24928, ECO2014-55488-P, PR2015-00645, and PR2015-00606), the Government of Catalonia (grants 2014-SGR-1079 and 2014-SGR-549), Bank Sabadell, and La Caixa Foundation. Publisher Copyright: {\textcopyright} 2018 Elsevier B.V.",
year = "2018",
month = sep,
doi = "10.1016/j.finmar.2018.01.001",
language = "English",
volume = "40",
pages = "40--59",
journal = "Journal of Financial Markets",
issn = "1386-4181",
publisher = "Elsevier B.V.",
}