This paper provides the first empirical test of the diversification of opinions theory and the groupshift theory using real business data. Our data set covers management teams and single managersof US equity mutual funds. Our results reject the group shift theory and support thediversification...

We examine overconfidence among equity mutual fund managers. While overconfidencehas been extensively documented among retail investors, evidence fromprofessional investors is scarce. Consistent with theories of overconfidence, we findthat fund managers trade more after good past performance....

Using detailed holdings of exchange-traded options, we examine how mutual funds use optionsand how options affect portfolio performance and risk. Options users underperform nonusers bytwo to three percent per year. The underperformance is especially pronounced for funds that areheavy users of...

This paper introduces two measures to investigate potential window-dressing behavior amongmutual fund managers. We show that unskilled managers that perform poorly are more likely towindow dress by strategically purchasing winner stocks and selling loser stocks near quarterends. Further, funds...

US equity mutual funds, on average, prefer realization of capital losses to capital gains. Nevertheless,a substantial fraction exhibits the disposition effect of realizing gains more readily than losses. Myanalysis suggests that learning effects have reduced the manifestation of the disposition...

The paper explores whether the co-movement of market returns and equity fundflows can be explained by a common response to macroeconomic news. I findthat variables that predict the real economy as well as the equity premium arerelated to mutual fund flows. Changes in dividend-price ratio explain...

This paper studies the flow-performance relationship of three di®erent investorgroups in mutual funds: Households, financial corporations, and insurance compa-nies and pension funds, establishing the following findings: Financial corporationshave a strong tendency to chase past performance and...

This is the first study of corporate-bond mutual fund performance that examines detailedsecurity-level holdings and returns. The new database allows us to decompose the costsand benefits of active management. In contrast to prior research on equity funds thatshows evidence of stock-selection...

This paper investigates the purchases and redemptions of a large cross-sectionalsample of German equity funds. We find that investors punish bad performance byselling their shares, but also have a tendency to sell winners. Investors in large fundfamilies show higher sales and redemption rates....

We present evidence of the impact of buy-side analysts on the behavior and performanceof fund managers. Using data provided by a large global asset manager,we relate buy-side analysts’ recommendations to fund transactions on a daily basis.Our results show that buy-side analysts have a...