Behavioral biases of mutual fund investors

Warren Bailey, Alok Kumar and David Ng ()

Journal of Financial Economics, 2011, vol. 102, issue 1, 1-27

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.

Keywords: Individual; investors; Mutual; funds; Trend; chasing; Behavioral; biases; Factor; analysis (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (114)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:102:y:2011:i:1:p:1-27

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