Impact of Fund Size on Performance and Risk of Closed-End Mutual Funds: An Empirical Analysis in the Context of Bangladesh

Abstract

This study examines the prospective statistical relationship between the size of closed-end mutual funds and their performance and risk within a comprehensive framework. The analysis encompasses both linear and quadratic relationships, employing established performance metrics including the Sharpe Ratio, Excess Return, Treynor Ratio, and the fund's total & systematic risk. In order to test the relationship, this research used the data from 35 closed-end mutual funds traded on the Dhaka Stock Exchange (DSE) in Bangladesh from 2017 to 2022. The empirical tests reveal a statistically significant negative linear relationship between the size of closed-end mutual funds and the performance measures, as well as the fund's systematic and total risk. Moreover, the findings provide compelling evidence of a concave quadratic relationship between mutual fund size and total risk, underscoring the presence of an optimal fund size from a risk perspective.