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Disposition Effect and Mutual Fund Performance

abstract This article finds strong evidence for the presence of the disposition effect among US mutual fund managers. The analysis can establish a link between the disposition effect and mutual fund characteristics as well as changes in the macroeconomic environment. Managers with a lower disposition effect are found to invest in larger equities with a higher trade volume, a higher past performance, lower idiosyncratic risk, and a higher risk-adjusted performance. However, fund characteristics and the economic environment can only explain a limited amount of the variation in the disposition effect across mutual funds. Using a new methodology to reduce the disposition effect exhibited by mutual fund investments, we find no increase in their profitability. Although statistically significant, the disposition effect has only a minor economic effect on fund performance
   
type journal paper
   
keywords disposition effect, mutual fund performance, behavioral finance
   
language English
kind of paper journal article
date of appearance 3-1-2012
journal Applied Financial Economics
publisher Taylor & Francis Group (London)
ISSN 0960-3107
ISSN (online) 1466-4305
DOI 10.1080/09603107.2011.595676
volume of journal 22
number of issue 1
page(s) 1-19
review double-blind review
   
citation Ammann, M., Ising, A., & Kessler, S. (2012). Disposition Effect and Mutual Fund Performance. Applied Financial Economics, 22(1), 1-19, DOI:10.1080/09603107.2011.595676.