NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Japanese Open-End Fund Puzzle

Stephen J. Brown, William N. Goetzmann, Takato Hiraki, Toshiyuki Otsuki, Noriyoshi Shiraishi

NBER Working Paper No. 6347
Issued in January 1998
NBER Program(s):   AP

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.

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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.

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