The Japanese open-end fund puzzle

Stephen Jeffrey Brown, William N Goetzmann, Takato Hiraki, Noriyoshi Shiraishi

Research output: Contribution to journalArticleResearchpeer-review

20 Citations (Scopus)

Abstract

Over the past 2 decades, Japanese mutual funds have consistently and dramatically under-performed risk-adjusted benchmarks. In this article, we examine manager style, tax dilution, and manager inefficiency as three potential explanations for this puzzle. Grouping funds by style of asset management, we find evidence that confirms Cai, Chan, and Yamada's (1997) conjecture that tax dilution contributes significantly to underperformance. We propose a simple instrument to control for this dilution effect. Using this instrument, we find that alphas of Japanese funds are statistically indistinguishable from zero for most types of funds over the period 1982-95.
Original languageEnglish
Pages (from-to)59-77
JournalJournal of Business
Volume74
Issue number1
Publication statusPublished - Jan 2001
Externally publishedYes

Cite this

Brown, S. J., Goetzmann, W. N., Hiraki, T., & Shiraishi, N. (2001). The Japanese open-end fund puzzle. Journal of Business, 74(1), 59-77.
Brown, Stephen Jeffrey ; Goetzmann, William N ; Hiraki, Takato ; Shiraishi, Noriyoshi. / The Japanese open-end fund puzzle. In: Journal of Business. 2001 ; Vol. 74, No. 1. pp. 59-77.
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Brown, SJ, Goetzmann, WN, Hiraki, T & Shiraishi, N 2001, 'The Japanese open-end fund puzzle', Journal of Business, vol. 74, no. 1, pp. 59-77.

The Japanese open-end fund puzzle. / Brown, Stephen Jeffrey; Goetzmann, William N; Hiraki, Takato; Shiraishi, Noriyoshi.

In: Journal of Business, Vol. 74, No. 1, 01.2001, p. 59-77.

Research output: Contribution to journalArticleResearchpeer-review

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N2 - Over the past 2 decades, Japanese mutual funds have consistently and dramatically under-performed risk-adjusted benchmarks. In this article, we examine manager style, tax dilution, and manager inefficiency as three potential explanations for this puzzle. Grouping funds by style of asset management, we find evidence that confirms Cai, Chan, and Yamada's (1997) conjecture that tax dilution contributes significantly to underperformance. We propose a simple instrument to control for this dilution effect. Using this instrument, we find that alphas of Japanese funds are statistically indistinguishable from zero for most types of funds over the period 1982-95.

AB - Over the past 2 decades, Japanese mutual funds have consistently and dramatically under-performed risk-adjusted benchmarks. In this article, we examine manager style, tax dilution, and manager inefficiency as three potential explanations for this puzzle. Grouping funds by style of asset management, we find evidence that confirms Cai, Chan, and Yamada's (1997) conjecture that tax dilution contributes significantly to underperformance. We propose a simple instrument to control for this dilution effect. Using this instrument, we find that alphas of Japanese funds are statistically indistinguishable from zero for most types of funds over the period 1982-95.

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JO - Journal of Business

JF - Journal of Business

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Brown SJ, Goetzmann WN, Hiraki T, Shiraishi N. The Japanese open-end fund puzzle. Journal of Business. 2001 Jan;74(1):59-77.