Financial Product Differentiation over the State Space in the Mutual Fund Industry

• 成果类型: Article
• 署名作者: Li, Shujing; Qiu, Jiaping
• 署名单位: McMaster University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2013.1779
• 发表日期: 2014
• 页码: 508-520
• 关键词: mutual fund styles; product differentiation; market share; fee; stochastic

摘要

By distancing themselves from others in risk factor loadings, mutual funds yield distinct returns and become better-performing funds in different market situations. This enables mutual funds to obtain stochastic market power and charge higher fees than they could otherwise. This strategy fundamentally differs from the conventional market segmentation strategy that targets investors with heterogeneous preferences. We present a model to study this novel form of financial product differentiation over the states of nature. Empirically, we find that the return attributable to risk factor loadings has a significant impact on a fund's market share. Fund fees are related to the positions of their factor loadings in the industry and funds with more extreme risk factor loadings charge higher fees.