There are three fundamental ways of testing the validity of an investment algorithm against historical evidence: a) the walk-forward method; b) the resampling method; and c) the Monte Carlo method. By far the most common approach followed among academics and practitioners is the walk-forward...

In this paper, I investigate the asset allocation ability of mutual fund investors. Specifically, I examine differences among non-proprietary brokers, proprietary brokers and direct channels regarding their asset allocation ability. In aggregate, mutual fund investors do not seem to have...

Behavioral finance presented in Finance for Normal People is a second generation behavioral finance. The first generation, starting in the early 1980s, largely accepted standard finance's notion of people's wants as “rational” wants – restricted to the utilitarian benefits of high returns...

We measure investors' short- and long-term stock-return expectations using both options and survey data. These expectations at different horizons reveal what investors think their own short-term expectations will be in the future, or forward return expectations. While contemporaneous short-term...

To increase understanding of the real world of the fund manager, the authors apply principles from emotional finance. They report their findings from analysing in-depth interviews of 52 traditional and quantitative-oriented equity managers. In particular, they examine the importance of...

U.S. 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. My analysis suggests that learning effects have reduced the manifestation of the...

The majority of active Asian equity strategies claim to derive their value addition by focussing their skill on security selection. We investigate if empirically this is the most appropriate area for an active Asian manager to focus on, in comparison to focussing on asset allocation as the...

We investigate the relationship between Value, Growth and two forms of Momentum across a wide range of developed and emerging international equity markets using MSCI total return ‘smart beta' indices. As would be anticipated, Value generally beats Growth. A distinction is then made between...

In this study, an attempt has been made to find out why investors still prefer broker-sold fund over direct-sold fund despite the superior performance of the latter. We find the sensitivity of funds flow in selected direct-sold funds and broker-sold funds in India. We do not find any evidence...