Estimation of Mutual Funds’ Transaction Costs

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Moradian, Hamed | 2019

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Type of Document: M.Sc. Thesis
Language: Farsi
Document No: 52460 (44)
University: Sharif University of Technology
Department: Management and Economics
Advisor(s): Barakchian, Mahdi; Ebrahimnejad, Ali
Abstract:
The average annual turnover of Iranian mutual funds is 330 percent during the years 2011 to 2017. Such a high-volume trading imposes substantial transaction costs on the funds and their investors. Transaction costs comprise four different types of costs: In addition to taxes and commissions, there are other transaction costs originating from bid-ask spread and price impact, which need more complicated procedures to assess. By using high-frequency data and the information in the fund’s seasonal financial statements, the transaction costs of fifteen Iranian mutual funds are estimated. These funds spent 11 percent of their value on the trading costs per anum. Furthermore, the relation between the fund’s trading costs and their performance is tested. During the years of 2013 and 2014, there is a negative relation between the fund’s transaction costs and their four-factor alpha, yet during the scope of our study, on average, no significant relation between the funds’ performances and their transaction costs is held
Keywords:
Iranian Mutual Funds ; Transaction Cost ; Mutual Fund ; Price Impact ; Bid-Ask Spread ; Fund Turnover ; Fund Performance

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