Behavioral Gaps Between Hypothetical Investment Returns and Actual Investor Returns

James Ming Chen
Additional contact information
James Ming Chen: Michigan State University

Chapter Chapter 11 in Finance and the Behavioral Prospect, 2016, pp 283-299 from Palgrave Macmillan

Abstract: Abstract Individual investors behave badly. “[I]nvestors with strong behavioral biases or lack of attention” to meaningful financial news are more likely to forgo equity ownership or to participate in capital markets “for the wrong reasons.”1 Individual investors, often the product of that lethal combination of ignorance and bias, “trade … frequently, tend to time their buys and sells badly, and prefer high expense [mutual] funds and active funds rather than index funds.”2 Behavioral biases cost investors. Narrow framing extracts a 2.16 % premium from the most heavily affected quintile of individual investors relative to the least affected quintile.3 The disposition effect costs the worst quintile 0.89 % in annual returns relative to best quintile.4

Keywords: Supra Note; Mutual Fund; Prospect Theory; Capital Gain; Disposition Effect (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:qpochp:978-3-319-32711-2_11

Ordering information: This item can be ordered from
http://www.palgrave.com/9783319327112

DOI: 10.1007/978-3-319-32711-2_11

Access Statistics for this chapter

More chapters in Quantitative Perspectives on Behavioral Economics and Finance from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().