The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Why Do Mutual Fund Advisory Contracts Change? Performance, Growth, and Spillover Effects
Published: 01/06/2011 | DOI: 10.1111/j.1540-6261.2010.01632.x
JEROLD B. WARNER, JOANNA SHUANG WU
We examine changes in equity mutual funds' investment advisory contracts. We find substantial advisory compensation rate changes in both directions, with typical percentage fee shifts exceeding one‐fourth. Rate increases are associated with superior past market‐adjusted performance, whereas rate decreases reflect economies of scale associated with growth, and are not associated with extreme poor performance. There are within‐family spillover effects. Superior (e.g., star) performance for individual funds is associated with rate increases for a family's other funds. Rate reductions post‐2004 by family funds involved in market timing scandals do not have large industry spillover effects.
Truth in Mutual Fund Advertising: Evidence on Future Performance and Fund Flows
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00232
Prem C. Jain, Joanna Shuang Wu
We examine a sample of 294 mutual funds that are advertised in Barron's or Money magazine. The preadvertisement performance of these funds is significantly higher than that of the benchmarks. We test whether the sponsors select funds to signal continued superior performance or they use the past superior performance to attract more money into the funds. Our analysis shows that there is no superior performance in the postadvertisement period. Thus, the results do not support the signaling hypothesis. On the other hand, we find that the advertised funds attract significantly more money in comparison with a group of control funds.