Performance evaluation of mutual funds: the case of France.

Summary Mutual funds are now recognized as an opportunity to diversify equity investments and are currently an alternative (or complement) to direct equity investments. The mutual fund industry is now present in most countries and has grown dramatically in recent years. Despite its importance, little research has been done on this industry outside the United States. Our study aims to fill this gap. Using a recent database provided by Eurofidai, we analyze the attributes and performance of European mutual funds, basing our study on the case of French equity funds. This PhD thesis examines the problem of investor selection when faced with a large amount of information that can result in confusion when allocating assets. In order to gain a better understanding of mutual funds, we analyze some factors and characteristics that are likely to have an impact on their performance and therefore influence investors' decision making. Our empirical study uses monthly data between 1990 and 2009 on a set of mutual funds invested in French equities. The objectives of the research are threefold: to assess the performance of mutual funds, to identify the characteristics that impact this performance and to identify potential explanations for the structure of management fees. Our results reveal that French funds prefer small and book-to-market stocks. We find that fund size and longevity have a positive impact on performance. We also show that there are economies of scale within fund families. For example, funds containing small-cap stocks favor investors by charging lower management fees. This research provides researchers, analysts and investors with answers to help them make better investment decisions in the mutual fund industry.