tailieunhanh - The World of Mutual Funds

However, there are a number of advantages to examining the smart money effect in fund management using our fund data. First, ourmoney f low data aremonthly rather than quarterly. Second, we observe exact f lows rather than approximations based on fund values and fund returns. Third, we can distinguish between institutional and individualmoney f lows. Fourth, we can distinguish between purchases and sales. A further advantage is that we are able to examine mutual fund investor behavior in a different institutional setting from that of the United States. For example, funds,. funds competewithinwell-defined peer groups, which may facilitate investors’ decision making. Also, the tax overhang issue (Barclay, Pearson, and. | The World of Mutual Funds Ajay Khorana Henri Servaes and Peter Tufano Ajay Khorana The Darden School - University of Virginia Henri Servaes London Business School and CEPR Peter Tufano Harvard Business School and NBER Draft April 25 2003 Copyright 2003 Ajay Khorana Henri Servaes and Peter Tufano Working papers are in draft form. This working paper is distributed for purposes of comment and discussion only. It may not be reproduced without the permission of the copyright holder. Copies of working papers are available from the authors. The World of Mutual Funds This paper studies the mutual fund industry in 55 countries around the world and tests various hypotheses for why the fund industry would be preferred by investors over two alternative asset management choices do-it-yourself options where the investors purchases primary assets and opaque financial institution options such as banking or insurance investments. Consistent with the law and economics literature we find that the mutual fund industry is larger in countries with stronger rules laws and regulations specifically where mutual fund investors rights are better protected. The industry is smaller in countries where barriers to entry are higher measured by the time and cost required to set up a new fund. The mutual fund sector is smaller when banks face restrictions when entering the securities business. The fund industry is larger in countries with a wealthier and more educated population. Finally the fund industry is larger in countries in which defined contribution pension plans are more prevalent. These results indicate that laws and regulation supply-side and demand-side factors all affect the size of the mutual fund industry. Ajay Khorana The Darden School University of Virginia . Box 65 50 Charlottesville VA 22906 KhoranaA@ Henri Servaes London Business School and CEPR Regent s Park London NW1 4SA hservaes@ Peter Tufano Harvard Business School and NBER Soldiers Field .