Publication Type
Journal Article
Version
publishedVersion
Publication Date
7-2025
Abstract
Active funds, though losing market share since the 1990s, make up nearly half of all mutual funds but charge more without better performance. We analyze fund data and a search model, highlighting the impact of search costs and active fund preferences. From 1993 to 2018, reduced search costs expanded the market and heightened competition, while a preference shift from active to passive funds increased the latter's market share. However, investors who choose active funds, facing higher search costs, and continue to show a strong preference for them, allow these funds to keep charging higher fees.
Keywords
Mutual funds, search costs, BLP
Discipline
Finance | Finance and Financial Management
Research Areas
Applied Microeconomics
Publication
Journal of Economic Dynamics and Control
Volume
176
First Page
1
Last Page
22
ISSN
0165-1889
Identifier
10.1016/j.jedc.2025.105099
Publisher
Elsevier
Citation
JANSSEN, Aljoscha and THIEL, Jurre.
Do search costs explain persistent investment in active mutual funds?. (2025). Journal of Economic Dynamics and Control. 176, 1-22.
Available at: https://ink.library.smu.edu.sg/soe_research/2805
Copyright Owner and License
Authors-CC-BY
Creative Commons License
This work is licensed under a Creative Commons Attribution 3.0 License.
Additional URL
https://doi.org/10.1016/j.jedc.2025.105099