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Mutual Fund Liquidity Costs
Author(s) -
Fulkerson Jon A.,
Riley Timothy B.
Publication year - 2016
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/fima.12157
Subject(s) - market liquidity , business , global assets under management , liberian dollar , equity (law) , monetary economics , liquidity risk , closed end fund , bond , fund of funds , open end fund , mutual fund , basis point , net asset value , finance , economics , institutional investor , corporate governance , political science , law
One dollar in purchases or redemptions generates an average cost of $0.006 for US equity mutual funds during the period 1997‐2009, approximately 70% lower than prior estimates derived from older data. However, large cross‐sectional differences exist between funds. Many funds have costs near zero, but funds that hold relatively illiquid equities, have relatively concentrated portfolios, and manage relatively large amounts of assets have average liquidity costs significantly greater than the full sample average. Furthermore, despite a large difference in underlying asset liquidity, US bond funds and US equity funds have similar average liquidity costs.