Fooled by randomness: Investor perception of fund manager skill

Justus Heuer, Christoph Merkle, Martin Weber

Publikation: Bidrag til tidsskrift/Konferencebidrag i tidsskrift /Bidrag til avisTidsskriftartikelForskningpeer review

9 Citationer (Scopus)

Abstract

Return-chasing investors almost exclusively consider top-performing funds for their investment decisions. When drawing conclusions about the managerial skill of these top performers, they tend to neglect fund volatility and the cross-sectional information contained in the number of funds and the distribution of skill. In multiple surveys of sophisticated retail investors, we show that they do not fully understand the role of chance in experimental samples of fund populations. Respondents evaluate each fund in isolation and do not sufficiently account for fund volatility. They confuse risk taking with manager skill and are thus likely to over-Allocate capital to lucky past winners.

OriginalsprogEngelsk
TidsskriftReview of Finance
Vol/bind21
Nummer2
Sider (fra-til)605-635
Antal sider31
ISSN1572-3097
DOI
StatusUdgivet - 1 jan. 2017
Udgivet eksterntJa

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