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| Author: | Goetzmann, W. N. Peles, N. |
| Title: | Cognitive dissonance and mutual fund investors |
| Journal: | Journal of Financial Research
1997 : SUMMER, VOL. 20:2, p. 145-158 |
| Index terms: | UNIT TRUSTS INVESTORS BIAS ESTIMATION PSYCHOLOGY |
| Language: | eng |
| Abstract: | A mystery in the mutual fund industry is why some investors stay with funds that consistently perform poorly. This paper provides evidence that investor psychology may affect the fund-switching decision. Investor aversion to switching from poor performers could be explained by overly optimistic perceptions of past mutual fund performance. Samples of educated and casual mutual fund investor recollections of past performance are consistently biased above actual past performance. This recollection bias could be why investors justify remaining in funds that consistently perfrom poorly. |
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