Returns-Chasing Behavior, Mutual Funds, and Beta's Death

Dynamics of Asset Prices and Transaction Activity in Illiquid Markets: the Case of Private Commercial Real Estate

“…Warther (1995Warther ( , 1998 and Remolona et al (1997) find no relation between mutual fund returns and subsequent flows. In contrast, Edwards and Zhang (1998);Fortune (1998); Cha and Lee (2001); Karceski (2002); and Edelen and Warner (2001) conclude that aggregate mutual fund returns do affect subsequent fund flows into the sector.…”

Comovement After Joining an Index: Spillovers of Nonfundamental Effects

“…11 11 These include, among others, Vijh (1994), Warther (1995), Edwards and Zhang (1998), Fortune (1998), Goetzmann, Massa and Rouwenhorst (2000), Cha and Lee (2001), Edelen and Warner (2001), Karceski (2003), Goetzmann and Massa (2003) and Ling and Naranjo (2003). …”

Alphabeticity Bias in 401(k) Investing

“…Assuming $5,000 annual contributions and a fixed 7% annual gross rate of return over a 30‐year period, this difference in fees, all else equal, costs an investor $20,440 in investment income—a loss equivalent to over four years’ worth of contributions. Alternatively, plan sponsors could employ other strategies to benefit plan participants, such as listing low volatility funds first as low volatility portfolios have been shown to outperform higher volatility portfolios over the past several decades (Baker, Bradley and Wurgler, ; Karceski, ).…”

“…Prior literature shows that expense ratio is a more reliable predictor of future return performance than past performance, with expense ratio and performance being negatively correlated (Elton, Gruber and Blake, ; Carhart, ). Alternatively, low volatility funds could be placed at the top of the plan menu given significant evidence in the literature that low volatility portfolios have outperformed higher volatility portfolios over the past several decades (Baker, Bradley and Wurgler, ; Karceski, ). Ultimately, the desired outcome could be decided by the plan sponsor and TPA using the knowledge that plan participants are, on average, biased toward picking funds at the top of plan menu lists.…”