Author(s): Mikhail Anufriev, Economics Discipline Group, UTS Business School, University of Technology, Sydney. Te Bao, Division of Economics, Nanyang Technological University, Singapore. Angela Sutan, Burgundy School of Business, University Bourgogne Franche-Comte CEREN. Jan Tuinstra, Amsterdam School of Economics, University of Amsterdam
Date of publication: September 2015
Working paper number: 30
Abstract: We present an experiment that investigates the effect of the fee structure and past returns on mutual fund choice. We find that subjects pay too little attention to the (periodic and small) operation expenses fee, but that the more salient front-end load is used as a commitment device and leads to lock-in into one of the funds. In addition we find that, even when subjects know that future returns are independent of past returns, these past returns are an important determinant of subjects’ investment choices.