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Let's assume that there are decreasing returns to scale in mutual funds caused by liquidity problems in scaling. This means that, holding everything else constant,
Let's assume that there are decreasing returns to scale in mutual funds caused by liquidity problems in scaling. This means that, holding everything else constant, there is a negative relationship between mutual fund size and returns. For which type of mutual fund do you think there is a stronger negative relationship between mutual fund size and performance: a fund that invests in stocks from a large country like the U.S. or a fund that invests in a smaller country like Belgium? Why?
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