Stewart L. Brown

• Ph.D
• Florida State University

Regulatory agencies are created to act in the public interest but often end up acting in the interests of those regulated. This is known as regulatory capture. The mutual fund industry is the custodian of massive levels of wealth of the investing public and is regulated by the Securities Exchange Commission (“the SEC”). Mutual fund assets are curre...

The issue of mutual fund advisory fees has a long and contentious history. Reports by the Wharton School and the SEC in the 1960’s found that mutual fund sponsors overcharged their captive mutual funds relative to institutional clients. This led to the 1970 Amendment to the Investment Company Act which made fund sponsors fiduciaries with respect to...

Investment advisors hold mutual funds captive, despite creating and managing them, giving rise to a conflict of interest. Prior research demonstrated that open end mutual funds overcharge customers by about 25 basis points annually for standard services as compared to similar services provided to public pension funds with no conflicts of interest....

A recent article in the Economist called attention to the mutual fund industry's flagrantly noncompetitive fee structure, noting that fund managers earn a "staggering" profit margin of 42% on average, largely because "most fund managers do not compete on price." Despite this reality, in a recent law review article based on research financed in part...

In a standard security market, it is assumed that market participants are rational, capable of acquiring and utilizing information, fraudulent and opportunistic behaviors do not pay and are avoided, and transaction costs are relatively low. Furthermore, there is no group of participants who are consistent winners or losers; and collectively, no neg...

The paper identifies differences between private (401 (k)) plans, which have evolved under ERISA and existing public plans, which have not. Examination of model legislation reveals that public plans should largely conform to ERISA going forward and reflect best practices in the private sector. Empirical analysis of equity mutual funds with $1.8 tri...

Churning involves excessive trading by stockbrokers in order to generate commissions. Current practice uses the turnover ratio to detect excessive trading. The turnover ratio is a flawed indicator of the actual harm of excessive trading which is commissions. This paper examines the intersection of law and financial analysis in the retail securities...

The portfolio approach to hedging assumes that the primary motivation for hedging is risk reduction. The paper reexamines the portfolio approach to hedging and respecifies the model in such a way that hedge ratios are estimated using returns rather than price levels. Using the same data set, hedge ratios estimated using price levels differ from one...

Recent studies have implied that the capital market has become more efficient with respect to the announcements of stock splits and corporate earnings. This study calculated residual returns associated with these announcements and then tested, by time period (early and late years), for a between period difference. The results suggest that for certa...

Interest in the Choice Dilemma Questionnaire (CDQ) has centered around the risk shift paradigm rather than around using the CDQ as a measure of an individual's risk preferences. Using 45 lower and middle management bankers as subjects in a computer-based simulation game, the authors found a significant relationship (p < .05) between risk propensity...