Open-end Fund Prices

How do open-end funds equilibrate?

Project title

If Generating Alpha Becomes More Difficult As AUM Increases, Shouldn’t Differences In Mutual Fund Alphas Vanish In Equilibrium?(HREC 1954862.1).


The aim of this investigation is to examine how the equilibrating mechanism differs for open-end funds when equilibrium is through quantities instead of prices. We rely on a controlled market experiment where participants allocate cash across three investment funds. Specifically, this research aims to examine whether open-end funds equilibrate in size with abnormal returns of all funds decreasing to zero at the end of the experiment. This project has been approved by the University of Melbourne’s Human Research Ethics Committee, and internally funded by The University of Melbourne.

What will I be asked to do?

You will be asked to participate in a trading session in which you need to allocate your experimental cash across three investment funds over multiple periods as you incorporate information about fund returns. The estimated time of commitment will be about 2 hours. Participation in this study is completely voluntary and the information collected will remain confidential. You will receive between $20 to $65 cash for your participation. Part of the payment will depend on your performance in the trading session, in other words, the cash you hold and the payoffs from your fund investments in one chosen period.

How will my confidentiality be protected?

This is an anonymous study. We will protect the confidentiality of your trading and responses to the fullest possible extent, within the limits of the law. Only anonymous participant codes will be used in storage of the data; identifying information is used only for payment purposes, and the link between identity and participant codes is kept separately from trading and response data. All data will be kept securely in the Department of Finance for a minimum of five years from the date of publications to result from the experiment.

How will I receive feedback?

Results of the study will be available from the researchers’ websites, be presented at conferences and be published in peer-reviewed journals.

Will participation prejudice me in any way?

Please be advised that your participation in this study is completely voluntary. Should you wish to withdraw at any stage, or withdraw any unprocessed data you have supplied, you are free to do so without prejudice, and receive $10. Any potential conflicts of interest arising if you are a student of the above researchers will not affect your grades in any way.

Where can I get further information?

Should you require any further information, or have any concerns regarding the conduct of this research, please contact Prof Peter Bossaerts on 03 9035 3257.

This project follows the guidelines of the National Health and Medical Research Council Statement on Human Experimentation, and has been approved by: Human Research Ethics Committee, The University of Melbourne.

If you wish to contact someone independent of the study about ethical issues or your rights, or if you have any concerns or complaints relating to your participation in the study, you may contact: The Executive Officer, Human Research Ethics Committee, The University of Melbourne (phone: 03 8344 2073, fax: 03 9347 6739).

How do I agree to participate?

If you decide to participate, please sign up for an experimental session here.

Human ethics approval

This study has been approved by the University of Melbourne Human Research Ethics Committee (project ID: HREC 1954862.1).

Brain, Mind and Markets Lab
Department of Finance
The University of Melbourne
Victoria 3010 Australia
Phone: +61 3 9035 9950