Risk-Adjusted Impact of Administrative Costs on the Distribution of Terminal Wealth for Long-Term Investment
The impact of administrative costs on the distribution of terminal wealth is approximated using a simple formula applicable to many investment situations. We show that the reduction in median returns attributable to administrative fees is usually at least twice the amount of the administrative costs...
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| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
Wiley
2014-01-01
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| Series: | The Scientific World Journal |
| Online Access: | http://dx.doi.org/10.1155/2014/521074 |
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| _version_ | 1850167820075139072 |
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| author | Montserrat Guillén Søren Fiig Jarner Jens Perch Nielsen Ana M. Pérez-Marín |
| author_facet | Montserrat Guillén Søren Fiig Jarner Jens Perch Nielsen Ana M. Pérez-Marín |
| author_sort | Montserrat Guillén |
| collection | DOAJ |
| description | The impact of administrative costs on the distribution of terminal wealth is approximated using a simple formula applicable to many investment situations. We show that the reduction in median returns attributable to administrative fees is usually at least twice the amount of the administrative costs charged for most investment funds, when considering a risk-adjustment correction over a reasonably long-term time horizon. The example we present covers a number of standard cases and can be applied to passive investments, mutual funds, and hedge funds. Our results show investors the potential losses they face in performance due to administrative costs. |
| format | Article |
| id | doaj-art-dfa5c7fe328f4887b5eaeaf81e495997 |
| institution | OA Journals |
| issn | 2356-6140 1537-744X |
| language | English |
| publishDate | 2014-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | The Scientific World Journal |
| spelling | doaj-art-dfa5c7fe328f4887b5eaeaf81e4959972025-08-20T02:21:07ZengWileyThe Scientific World Journal2356-61401537-744X2014-01-01201410.1155/2014/521074521074Risk-Adjusted Impact of Administrative Costs on the Distribution of Terminal Wealth for Long-Term InvestmentMontserrat Guillén0Søren Fiig Jarner1Jens Perch Nielsen2Ana M. Pérez-Marín3Department of Econometrics, Riskcenter-IREA, University of Barcelona, Diagonal 690, 08034 Barcelona, SpainATP Pension Fund, Kongens Vaenge 8, 3400 Hilleroed, DenmarkCass Business School, City University London, 106 Bunhill Row, London EC1Y 8TZ, UKDepartment of Econometrics, Riskcenter-IREA, University of Barcelona, Diagonal 690, 08034 Barcelona, SpainThe impact of administrative costs on the distribution of terminal wealth is approximated using a simple formula applicable to many investment situations. We show that the reduction in median returns attributable to administrative fees is usually at least twice the amount of the administrative costs charged for most investment funds, when considering a risk-adjustment correction over a reasonably long-term time horizon. The example we present covers a number of standard cases and can be applied to passive investments, mutual funds, and hedge funds. Our results show investors the potential losses they face in performance due to administrative costs.http://dx.doi.org/10.1155/2014/521074 |
| spellingShingle | Montserrat Guillén Søren Fiig Jarner Jens Perch Nielsen Ana M. Pérez-Marín Risk-Adjusted Impact of Administrative Costs on the Distribution of Terminal Wealth for Long-Term Investment The Scientific World Journal |
| title | Risk-Adjusted Impact of Administrative Costs on the Distribution of Terminal Wealth for Long-Term Investment |
| title_full | Risk-Adjusted Impact of Administrative Costs on the Distribution of Terminal Wealth for Long-Term Investment |
| title_fullStr | Risk-Adjusted Impact of Administrative Costs on the Distribution of Terminal Wealth for Long-Term Investment |
| title_full_unstemmed | Risk-Adjusted Impact of Administrative Costs on the Distribution of Terminal Wealth for Long-Term Investment |
| title_short | Risk-Adjusted Impact of Administrative Costs on the Distribution of Terminal Wealth for Long-Term Investment |
| title_sort | risk adjusted impact of administrative costs on the distribution of terminal wealth for long term investment |
| url | http://dx.doi.org/10.1155/2014/521074 |
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