Fee waivers for tax-exempt money market mutual funds |
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Authors: | Joseph A Farinella Randy D Jorgensen |
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Institution: | (1) Department of Economics and Finance, University of North Carolina at Wilmington, 601 South College Road, 28403 Wilmington, NC;(2) College of Business Administration, Creighton University, 2500 California Plaza, 68178 Omaha, NE |
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Abstract: | In this study we investigate why tax-exempt money market mutual funds often waive fees. Contrary to statements in the popular
press, our results provide weak evidence that fee waivers lead to asset growth. We find strong evidence, however, that fee
waivers are used to keep the fund’s reported yield in line with competitors. We find that funds have comparable before-expense
yields and that smaller funds generally have higher expenses. If all expenses were charged to investors, then smaller funds
would significantly underperform larger funds. Thus, in order to keep reported yields in line with competitors, smaller funds
must waive a significant portion of fees.(JEL G20, G21) |
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