Information Sharing, Return Characteristics, and Portfolio Beta

Abstract

The spanning of financial products by the same mutual fund group is evidenced by the dramatic increase in the of mutual funds offered by the a mutual fund group in recent years. This study examines this issue, in the form of information sharing, along with other related issues such as factors in mutual funds that may affect the recent returns; the impact of transaction costs on the investment choice under different investment horizons; the effect of fund size on returns. The results show that information sharing, economies of scale, and higher management efficiency do not explain the better apparent performance of the mutual funds with the most separate funds. A significant positive relationship is found between management fees and long-term returns, suggesting a premium for superior long-term fund management skills. Mutual fund returns are found to exhibit a firm-size effect even after controlling for beta risk. In the long run, mutual fund excess returns behave in accordance with the predictions of the CAPM.