We show that mutual fund ratings generate correlated demand that creates systematic price fluctuations. Mutual fund investors chase fund performance via Morningstar ratings. Until June 2002, funds pursuing the same investment style had highly correlated ratings. Therefore, rating-chasing...

We link a seemingly biased trading behavior to equilibrium asset prices. U.S. equity mutual fund managers tend to sell both their big winners and big losers. This selling pressure pushes down current prices and leads to higher future returns; aggregating across funds, we nd that securities for...

It is widely believed that Closed-End Fund (CEF) discounts are due to the relatively disproportionate large numbers of small investors compared to institutional investors trading in them. An asset that is mainly traded by small investors has additional risk due to the fear factor that is usually...