An Investigation of Diseconomies of Scale in Volatile Markets under short-term Periods: Analyzing the Impact of fund-specific Variables on Mutual Fund Performance during Market Turbulence

Sammanfattning

This thesis explores the relationship between mutual fund size and performance during market volatility, focusing on U.S.-equity actively managed mutual funds from 2019 to 2023. Unlike findings from stable, long-term periods, no significant relationship is observed between assets under management and benchmark-adjusted returns in this turbulent time frame. Turnover ratio emerges as a key factor, showing a significant negative relationship with gross and net returns, likely due to higher trading costs, and a weak negative relationship with fund size, suggesting larger funds trade less actively. However, low R² values indicate limited explanatory power. These results highlight the complexity of fund performance during volatile periods and the need for broader research to better understand the interplay between fund-specific and market-level factors.