We find that mutual fund investors are more likely to both purchase and redeem funds with high idiosyncratic volatility (IV). Investors' tendency to purchase high IV funds is largely driven by high IV funds having more extreme returns, which increases the salience of the fund. Including flexible...

In a standard four factor framework, mutual fund return volatility is a reliable, persistent, and powerful predictor of future abnormal returns. However, the abnormal returns are eliminated by the addition of a “vol” anomaly factor contrasting returns on portfolios of low and high volatility...

We examine why mutual funds appear to underperform hedge funds. Utilizing a unique panel of mutual fund contracts changes, we explore several possible channels, including: alternative investment practices (e.g., short sales and leverage), performance-based compensation, and the ability to...