tailieunhanh - Behavioral Biases of Mutual Fund Investors

Leveraging refers to the process by which private sector capital is mobilised as a consequence of the use of public sector finance and financial instruments. Public finance can „crowd in‟ private capital by compensating private investors for what would otherwise be lower than their required risk-adjusted rates of return (AGF, 2010). There is no uniform methodology to calculate leverage ratios of public to private finance, and different financial institutions report this ratio in different ways. Sometimes leverage ratios are expressed as the ratio of total funding to public funding; the ratio of private funding to public funding; or the. | Behavioral Biases of Mutual Fund Investors Warren Bailey Cornell University Johnson Graduate School of Management Alok Kumar University of Miami University of Texas at Austin David Ng University of Pennsylvania Wharton School Cornell University 5th July 2010 Abstract We examine the effect of behavioral biases on the mutual fund choices of a large sample of . 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. Beyond documenting the importance of behavioral factors in the delegated management setting of mutual funds applying factor analysis to the individual behavioral bias measures and other characteristics identifies several investor stereotypes that we relate to mutual fund trading and performance. JEL Codes G11 D03 Keywords individual investors mutual funds trend chasing behavioral biases factor analysis. Address for Correspondence Warren Bailey Johnson Graduate School of Management Cornell University Sage Hall Ithaca NY 14853-6201 phone 607-255-4627 fax 607-255-4627 wbb1@ Alok Kumar University of Miami School of Business Administration 514 Jenkins Building Coral Gables FL 33124 phone 305-284-1882 fax 305-2844800 akumar@ and David Ng Wharton School University of Pennsylvania Steinberg Hall-Dietrich Hall 3620 Locust Walk Philadelphia PA 19104-6302 and Dyson School of Applied Economics and Management Cornell University Ithaca NY 14853-7801 phone 607-279-7141 dtn4@. We thank an anonymous referee Malcolm Baker AFA discussant Nick Barberis Robert Battalio Zahi Ben-David Garrick Blalock Charles Chang Susan