Mutual Fund Size and Fund Performance

Abstract

This thesis studies the relationship between size and performance for 67 equity mutual funds in Norway, using a 14 years dataset free of survivorship bias from January 2005 to December 2018. We construct three portfolios based on the funds’ size and evaluate their performance by looking at their risk-adjusted return estimated from various factor models. We find no significant evidence that Norwegian mutual funds are able to beat their benchmark, both gross of fees and net of fees. Further, we study the relationship between fund size and performance while controlling for different fund characteristics. We find a statistically significant negative relationship between fund size and performance. Thus, our results indicate that size matters for mutual fund performance in Norway. We suggest that these findings come from price mechanisms, complex decisionmaking processes, and the fact that the Norwegian mutual fund market has a narrow asset base that could cause investors to dilute their best ideas.