Why are most funds open-end?
Subtitle: competition and the limits of arbitrage
By: Jeremy C. Stein.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10259; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10259.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Mutual funds.; Hedge funds.; Arbitrage.
Description: "The majority of asset-management intermediaries (e.g., mutual funds, hedge funds) are structured on an open-end basis, even though it appears that the open-end form can be a serious impediment to arbitrage.  I argue that the equilibrium degree of open-ending in an economy can be excessive from the point of view of investors.  When funds compete for investors' dollars, they may engage in a counterproductive race towards the open-end form, even though this form leaves them ill-suited to undertaking certain types of arbitrage trades.  One implication of the analysis is that, even absent short-sales constraints or other frictions, economically large mispricings can coexist with rational, competitive arbitrageurs who earn small excess returns"--National Bureau of Economic Research web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 1/21/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.