Abstract
We examine the effect of behavioral biases on the mutual fund choices of a large sample of US discount brokerage investors using new measures of attention to news, tax awareness, and fund-level familiarity bias, in addition to behavioral and demographic characteristics of earlier studies. Behaviorally biased investors typically make poor decisions about fund style and expenses, trading frequency, and timing, resulting in poor performance. Furthermore, trend chasing appears related to behavioral biases, rather than to rationally inferring managerial skill from past performance. Factor analysis suggests that biased investors often conform to stereotypes that can be characterized as Gambler, Smart, Overconfident, Narrow Framer, and Mature.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 1-27 |
| Number of pages | 27 |
| Journal | Journal of Financial Economics |
| Volume | 102 |
| Issue number | 1 |
| DOIs | |
| State | Published - Oct 2011 |
Fingerprint
Keywords
- Behavioral biases
- Factor analysis
- Individual investors
- Mutual funds
- Trend chasing
ASJC Scopus subject areas
- Accounting
- Strategy and Management
- Economics and Econometrics
- Finance
Cite this
Behavioral biases of mutual fund investors. / Bailey, Warren; Kumar, Alok; Ng, David.
In: Journal of Financial Economics, Vol. 102, No. 1, 10.2011, p. 1-27.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Behavioral biases of mutual fund investors
AU - Bailey, Warren
AU - Kumar, Alok
AU - Ng, David
PY - 2011/10
Y1 - 2011/10
N2 - We examine the effect of behavioral biases on the mutual fund choices of a large sample of US discount brokerage investors using new measures of attention to news, tax awareness, and fund-level familiarity bias, in addition to behavioral and demographic characteristics of earlier studies. Behaviorally biased investors typically make poor decisions about fund style and expenses, trading frequency, and timing, resulting in poor performance. Furthermore, trend chasing appears related to behavioral biases, rather than to rationally inferring managerial skill from past performance. Factor analysis suggests that biased investors often conform to stereotypes that can be characterized as Gambler, Smart, Overconfident, Narrow Framer, and Mature.
AB - We examine the effect of behavioral biases on the mutual fund choices of a large sample of US discount brokerage investors using new measures of attention to news, tax awareness, and fund-level familiarity bias, in addition to behavioral and demographic characteristics of earlier studies. Behaviorally biased investors typically make poor decisions about fund style and expenses, trading frequency, and timing, resulting in poor performance. Furthermore, trend chasing appears related to behavioral biases, rather than to rationally inferring managerial skill from past performance. Factor analysis suggests that biased investors often conform to stereotypes that can be characterized as Gambler, Smart, Overconfident, Narrow Framer, and Mature.
KW - Behavioral biases
KW - Factor analysis
KW - Individual investors
KW - Mutual funds
KW - Trend chasing
UR - http://www.scopus.com/inward/record.url?scp=84860389471&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84860389471&partnerID=8YFLogxK
U2 - 10.1016/j.jfineco.2011.05.002
DO - 10.1016/j.jfineco.2011.05.002
M3 - Article
AN - SCOPUS:84860389471
VL - 102
SP - 1
EP - 27
JO - Journal of Financial Economics
JF - Journal of Financial Economics
SN - 0304-405X
IS - 1
ER -