Publication

Mutual fund competition in the presence of dynamic flows

Julien Hugonnier
2010
Conference Papers

Abstract

This paper analyzes competition between mutual funds in a multiple funds version of the model of Hugonnier and Kaniel (2010). We characterize the set of equilibria for this portfolio management game and show that there exists a unique Pareto optimal equilibrium. The main result of this paper shows that the funds cannot differentiate themselves through portfolio choice in the sense that they should offer the same risk/return tradeoff in equilibrium. This result brings theoretical support to the findings of recent empirical studies on the importance of media coverage and marketing in the mutual funds industry. (C) 2010 Elsevier Ltd. All rights reserved.

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https://infoscience.epfl.ch/entities/publication/37f6d6fc-65e0-415c-8f18-b0029c1a1bce

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Julien Hugonnier
2010
Conference Papers

Abstract

Official source

https://infoscience.epfl.ch/entities/publication/37f6d6fc-65e0-415c-8f18-b0029c1a1bce

About this result

Related concepts (30)

Mutual fund

A mutual fund is an investment fund that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV in Europe ('investment company with variable capital') and open-ended investment company (OEIC) in the UK. Mutual funds are often classified by their principal investments: money market funds, bond or fixed income funds, stock or equity funds, or hybrid funds.

General equilibrium theory

In economics, general equilibrium theory attempts to explain the behavior of supply, demand, and prices in a whole economy with several or many interacting markets, by seeking to prove that the interaction of demand and supply will result in an overall general equilibrium. General equilibrium theory contrasts with the theory of partial equilibrium, which analyzes a specific part of an economy while its other factors are held constant.

Money market fund

A money market fund (also called a money market mutual fund) is an open-ended mutual fund that invests in short-term debt securities such as US Treasury bills and commercial paper. Money market funds are managed with the goal of maintaining a highly stable asset value through liquid investments, while paying income to investors in the form of dividends. Although they are not insured against loss, actual losses have been quite rare in practice.

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