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Ilia Dichev (2004)
What are Stock Investors' Actual Historical Returns? Evidence from Dollar-Weighted ReturnsFinancial Accounting eJournal
Oded Braverman, Shmuel Kandel, Avi Wohl (2005)
The (Bad?) Timing of Mutual Fund Investors
M. Kobal (2009)
Dumb Money: Mutual Fund Flows and the Cross-Section of Stock ReturnsCfa Digest, 39
Azi Ben-Rephael, Shmuel (deceased), Avi Wohl (2011)
Measuring Investor Sentiment with Mutual Fund FlowsFEN: Behavioral Finance (Topic)
R. Merton (1980)
On Estimating the Expected Return on the Market: An Exploratory InvestigationCapital Markets: Asset Pricing & Valuation
Philip Maymin, Zakhar Maymin (2010)
Any regulation of risk increases riskFinancial Markets and Portfolio Management, 26
Ilia Dichev, Gwen Yu (2009)
Higher Risk, Lower Returns: What Hedge Fund Investors Really EarnCapital Markets: Market Efficiency eJournal
Geoffrey Friesen, Travis Sapp (2007)
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Bruce Phelps (2007)
What Are Stock Investors’ Actual Historical Returns? Evidence from Dollar-Weighted ReturnsCfa Digest, 37
Quantitative analysis of investor behavior 2010, 2010, available at: dalbar.com
The performance of the average investor in an asset class lags the average performance of the asset class itself by an average of one percent per year over the past fifteen years, based on net investor mutual fund cash flows. We present a model in which a representative behavioral investor believes next year's returns will exactly match last year's returns and show that this leads to price adjustments on what would otherwise be random walk securities that effectively lower the future return of high performers and raise the future return of poor performers. The average predicted behavioral lag indeed matches the observed lag when asset returns are normally distributed with a mean and standard deviation equivalent to historical fifteen year averages of six percent and eighteen percent, respectively, and when the representative investor increases his allocation by 25% more than the return itself, a prediction for which we document empirical support. In other words, investors chase returns and in doing so create the conditions of their own demise.
Risk and Decision Analysis – IOS Press
Published: Jan 1, 2011
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