Review of Financial Studies · 2021 · 110 citations · 79 references
Investment StrategyFinancial EconomicsFund ManagementHedge FundManagementBusinessMutual Fund InvestorsMutual FundsHomo SapiensFinanceMutual Fund SpaceFinancial Risk
Abstract We show that mutual fund investors rely on simple signals and likely do not engage in sophisticated learning about managers’ alpha as widely believed. Simplistic performance chasing best explains aggregate flows to the mutual fund space and flows across funds. These results hold for both actively managed and passive index funds. Empirical patterns commonly interpreted as reflecting learning about managerial skill also appear in falsification tests and are mechanical. Our results are consistent with the view that, on average, households are homo sapiens with limited financial sophistication rather than hyperrational alpha-maximizing agents, as often assumed in the literature.
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On Persistence in Mutual Fund Performance
Mark M. Carhart · The Journal of Finance · 1997 · 16.7K citations · Full text
Asset Allocation, Portfolio Management, Equity Portfolios +19
Risk, Return, and Equilibrium: Empirical Tests
Eugene F. Fama, James D. MacBeth · Journal of Political Economy · 1973 · 14.9K citations