Finance Papers

Document Type

Journal Article

Date of this Version

2002

Publication Source

Review of Financial Studies

Volume

15

Issue

5

Start Page

1499

Last Page

1524

DOI

10.1093/rfs/15.5.1499

Abstract

One reason why funds charge different prices to their investors is that they face different demand curves. One source of differentiation is asset retention: Performance-sensitive investors migrate from worse to better prospects, taking their performance sensitivity with them. In the cross-section we show that past attrition significantly influences the current pricing of retail but not institutional funds. In time-series we show that the repricing of retail funds after merging in new shareholders is predicted by the estimated effect on its demand curve. This result is robust to other influences on repricing, including asset and account-size changes.

Copyright/Permission Statement

This is a pre-copyedited, author-produced PDF of an article accepted for publication in Review of Financial Studies following peer review. The version of record is available online at: http://dx.doi.org/10.1093/rfs/15.5.1499.

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Date Posted: 27 November 2017

This document has been peer reviewed.