Performance of Mutual Funds in the Pre-Versus Post-Mayday Periods
The century-old fixed brokerage commission system ended May 1, 1975. This is referred to as Mayday. To examine whether mutual funds benefited from the deregulation of brokerage commission rates, a regression model and the cumulative average residuals method are used to analyze the performance of mutual funds before and after Mayday. The analyses are extended to different types of funds to examine differential impacts of deregulation. In addition, the residual returns of mutual funds are compared to those of an unmanaged portfolio of Standard & Poor's 500 stocks. It is found that mutual funds have benefited only marginally from the commission rate reduction. The returns to mutual fund portfolios have risen only slightly in the post-deregulation period. However, the turnover rates of mutual fund portfolios have risen substantially, which partially offsets the benefit of the commission rate reduction. It is also found that deregulation has benefited growth funds more than income-oriented funds.
Quarterly Journal of Business and Economics
WU, Chunchi and Kim, Moon.
Performance of Mutual Funds in the Pre-Versus Post-Mayday Periods. (1989). Quarterly Journal of Business and Economics. 28, (2), 61. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/866