The Japanese Open-End Fund Puzzle
Stephen J. Brown, William N. Goetzmann, Takato Hiraki, Toshiyuki Otsuki, Noriyoshi Shiraishi
NBER Working Paper No. 6347
Recent empirical evidence has suggested that the Japanese mutual fund industry has" underperformed dramatically over the past two decades. Conjectured reasons for" underperformance range from tax-dilution effects to high fees, high turnover and poor asset" management. In this paper, we show that this underperformance is largely due to tax-dilution" effects, and not necessarily to poor management. Using a broad database of funds which" includes investment trusts closed to new investment, we show that once an instrument for the" time-varying tax-dilution exposure is included in a factor model, there is little evidence of poor" risk-adjusted performance. A style analysis of the industry demonstrates that managers appear to" pursue tax-driven dynamic strategies.
Published: Brown, Stephen J, et al, 2001. "The Japanese Open-End Fund Puzzle," Journal of Business, University of Chicago Press, vol. 74(1), pages 59-77, January.