Does Fund Size Erode Mutual Fund Performance? The Role of Liquidity and Organization
American Economic Review, 2004

In this study, Associate Professor Joseph Chen and his co-authors investigate the effect of scale on performance in the active money management industry. They first document that fund returns, both before and after fees and expenses, decline with lagged fund size, even after adjusting these returns by various performance benchmarks. They then explore a number of potential explanations for this relationship.