Extreme fund performance and investor divergence in beliefs about manager skill

Yaosong Zhan, Wenwen Zhang and Zhenya Liu
Additional contact information
Yaosong Zhan: NSYSU - National Sun Yat-sen University
Wenwen Zhang: NSYSU - National Sun Yat-sen University
Zhenya Liu: Métis Lab EM Normandie - EM Normandie - École de Management de Normandie = EM Normandie Business School

Post-Print from HAL

Abstract: Extreme fund performance creates divergent investor opinions about manager skill. We develop a model predicting that this disagreement follows a U-shaped pattern, increasing with both exceptionally good and poor performance. Using a flow-based divergence index and Chinese mutual fund data, we empirically confirm this relationship. We argue that this pattern is driven by retail investors, whose tendency to focus on extreme outcomes amplifies their disagreement. Higher divergence predicts weaker future performance persistence but also helps investors improve their realized returns by allowing them to exit funds before subsequent downturns.

Date: 2025-08-25
References: Add references at CitEc
Citations:

Published in Journal of Financial Markets, 2025, pp.101009. ⟨10.1016/j.finmar.2025.101009⟩

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:hal:journl:hal-05290654

DOI: 10.1016/j.finmar.2025.101009

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().