The systematic biases in decision-making in the mutual-fund markets: Market states and disposition effect

Abstract

We have investigated the influence of investors' expectation of future market trends on their trading and investment decisions in various market states. The efficiency of mutual-fund markets can be threatened by systematic biases in different decision-makings. Mutual-fund investors exhibit the disposition effect whereas neither type of investor exhibits such effect in the bear market. Stock-fund investors in the bull and neutral markets exhibit the disposition effect, whereas balanced-fund investors exhibit the disposition effect only in the neutral market. This study enables mutualfund managers to plan cash holdings in the trading of various types of mutual funds and in various market states to respond to future fund investors' fund redemption. Multiple regression analysis is conducted to verify whether stock-fund investors are prone to exhibit the disposition effect in various market states. Stock-fund investors exhibit a higher tendency toward the disposition effect than the balanced-fund investors. In addition, in the bear market the redemption rate for the stock-fund investors is higher than that for the balanced-fund investors that resulted in a high turnover rate.

Disposition Effect: Does Investor Confidence Matter? Examining Service From Securities Brokerages

“…Training organized by securities brokers has a positive effect on the level of satisfaction of novice investors. Satisfaction is not formed over time but gradually so that based on the training, which makes novice investors feel the benefits of the training, it has an important role in determining satisfaction (Wu et al, 2018). Novice investors are individuals who expect to get capital gains, so the training will help to get the expected profit level (Cai et al, 2018).…”

Health insurance policy renewal: an exploration of reputation, performance, and affect to understand customer inertia

“…Inertia is defined as the tendency to stick to the prevailing habits or course of actions even when a better decision substitute is offered or available to someone (Samuelson and Zeckhauser 1988 ). Other customer inertia metaphors are: status quo preservation (De Guinea and Markus 2009 ), consumer resistance (Mani and Chouk 2018 ), drive for repeat purchases (Ranaweera and Neely 2003 ), systematic bias (Wu et al 2018 ) and loyalty or spurious loyalty (Wu and Lo 2012 ) which is demarcated as the condition when a customer purchases the same offering every time without conscious thinking or commitment toward company (Huang and Yu 1999 ). Numerous reasons can explain inertia as a phenomenon, e.g., convenience orientation, uncertainty avoidance, habitual orientation toward decision making and the risk avoidance (Lee and Joshi 2017 ).…”