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In this paper, the authors analyze economies of scale for German mutual fund complexes. Using 2002-2005 data of 41 investment management companies, they specify a hedonic translog cost function. Applying a fixed effects regression on a one-way error component model there is clear evidence of significant overall economies of scale. On the level of individual mutual fund complexes they find significant economies of scale for all of the companies in this sample. With regard to cost efficiency, they find that the average mutual fund complexes in all size quartiles deviate considerably from the best practice cost frontier.
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