FIRN PhD Brown Bag Seminar: Zijin Xu (Vivian), PhD student, Melbourne

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The FIRN PhD Student Brown Bag Network Committee is hosting fortnightly Brown Bag Seminars during 2021 targeted to Finance PhD students.

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The FIRN PhD Student Brown Bag Network Committee invites you to a virtual seminar presented by Zijin Xu (Vivian), PhD student, University of Melbourne

Title: The Loss-leader Pricing Strategy of Mutual Fund Families

Abstract: Why do some funds charge low fees? This study provides a family-level perspective by studying one specific pricing strategy whose traces are mostly found in anecdotal evidence. The loss-leader strategy refers to the cases where fund families advertise below-competitive level price for selective funds in the hope to lure investors into the family and profit from other funds they purchase in the family. This paper provides empirical evidence that the fund families strategically set low operating expenses for some of its member funds. Both univariate and multivariate analysis support this finding. The results of flow tests show that loss-leader funds bring positive net flows to themselves and overall family but doing so at the expense of their same-category “sister” funds in the same family. Strategic pricing is due to flow incentives whose trace can be found in the characteristics of loss-leader funds and loss-leader families. Smaller funds, younger funds, index funds and funds with lower turnover ratio are more likely to be chosen as loss-leader funds while families with more funds under management and bigger in size are more likely to implement the loss-leader strategy. Performance tests show that the loss-leaders only enjoy superior performance during their loss-leader periods but fail to outperform their sister funds in the same family during non-loss leader periods. This study also proposes a method to identify loss-leader funds which jointly examines the performance effect and advertisement effect on net flows.

Discussant: Xize Guo, PhD student, RMIT University

Moderatedy by: Farhan Shazia, PhD student, Monash University

All FIRN PhD students are welcome to this event.   Please register your interest and you will be sent an email the day before with the zoom code.

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Organiser FIRN

Organiser of FIRN PhD Brown Bag Seminar: Zijin Xu (Vivian), PhD student, Melbourne

FIRN is the premier network of finance researchers and PhD students across Australia and recently New Zealand.  Researchers from all of the major schools, departments and universities who offer research programs across the various topic areas of finance are members of FIRN.

The purpose of FIRN is to provide a strong, cohesive and fiscially efficient approach toward supporting research and advancements in the Australian finance academic community.  FIRN’s program of events and initiatives aims to develop better communication and networking across the sector, better research outcomes, better educated PhD students, better skilled academics, stronger international relationships and a stronger future.

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