Behavioral biases of mutual fund investors
We examine the effect of behavioral biases on the mutual fund choices of a large sample of US discount brokerage investors using new measures of attention to news, tax awareness, and fund-level familiarity bias, in addition to behavioral and demographic characteristics of earlier studies. Behaviorally biased investors typically make poor decisions about fund style and expenses, trading frequency, and timing, resulting in poor performance. Furthermore, trend chasing appears related to behavioral biases, rather than to rationally inferring managerial skill from past performance. Factor analysis suggests that biased investors often conform to stereotypes that can be characterized as Gambler, Smart, Overconfident, Narrow Framer, and Mature.
Year of publication: |
2011
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Authors: | Bailey, Warren ; Kumar, Alok ; Ng, David |
Published in: |
Journal of Financial Economics. - Elsevier, ISSN 0304-405X. - Vol. 102.2011, 1, p. 1-27
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Publisher: |
Elsevier |
Keywords: | Individual investors Mutual funds Trend chasing Behavioral biases Factor analysis |
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