Scale Effects in Mutual Fund Performance: A Study of the Norwegian Market

Abstract

In this paper, we investigate the effect of scale on performance in the Norwegian mutual fund industry. The study includes a data sample free of survivorship bias containing 70 Norwegian open-end actively managed mutual funds. Overall, we find no statistically significant relationship between the lagged size of Norwegian mutual funds and performance. Also, the study shows that there exist no liquidity effects in the Norwegian mutual fund market of holding small-cap shares. Further, we prove that a funds return does not decline with the lagged size of the family it belongs to, suggesting that scale of mutual funds not necessarily need to be negative depending on how the fund is organized.