Institutional S&P 500 Index Mutual Funds as Financial Commodities: Fact or Fiction?

26 Pages Posted: 23 Apr 2008 Last revised: 3 Mar 2017

See all articles by John A. Haslem

John A. Haslem

University of Maryland - Robert H. Smith School of Business; University of Maryland - Robert H. Smith School of Business

H. Kent Baker

American University - Kogod School of Business

David M. Smith

State University of New York at Albany - School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: February 1, 2008

Abstract

Given their simplicity and presumed commodity-like nature, institutional S&P 500 Index mutual funds should be subject to active price competition, resulting in only nominal size-adjusted differences in expenses. We find a wide disparity among fund expense ratios and their corresponding characteristics and performance.

Overall, the evidence suggests some price competition among institutional S&P 500 Index funds, but not to the extent that they may be considered financial commodities. One explanation for the existence of high-priced index funds is that they tend to require significantly lower minimum initial purchases. Our data do not support the notion that institutional investors buy high-priced S&P 500 index funds to access broader or lower-cost investment services from fund families. We conclude the market for institutional S&P 500 Index funds is not completely homogenous.

Keywords: mutual funds, institutional index, financial commodity, price competition, minimum initial purchase

JEL Classification: G2, G23, G28

Suggested Citation

Haslem, John A. and Haslem, John A. and Baker, H. Kent and Smith, David McNeil, Institutional S&P 500 Index Mutual Funds as Financial Commodities: Fact or Fiction? (February 1, 2008). Available at SSRN: https://ssrn.com/abstract=1124096 or http://dx.doi.org/10.2139/ssrn.1124096

John A. Haslem (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742
United States
202-387 2025 (Phone)

University of Maryland - Robert H. Smith School of Business ( email )

5901 MacArthur Blvd NW 124
Washington, DC DC 20016
United States
202-236 3172 (Phone)

H. Kent Baker

American University - Kogod School of Business ( email )

4400 Massachusetts Avenue NW
Washington, DC 20816-8044
United States
202-885-1949 (Phone)
202-885-1992 (Fax)

David McNeil Smith

State University of New York at Albany - School of Business ( email )

1400 Washington Ave.
Albany, NY 12222
United States

HOME PAGE: http://www.albany.edu/ciim

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