Investors have too often extrapolated from recent experience. In the 1950s, who but the most rampant optimist would have dreamt that over the next fifty years the real return on equities would be 9% per year? Yet this is what happened in the U.S. stock market. The optimists triumphed. However,...

Mutual fund investors evaluate fund managers' skills before making investment decisions. Previous studies worldwide examined the rationale behind retail investors' investment decisions and found that investors reward performance by net fund flow. A Japanese study found that investors respond to...