COGNITIVE DISSONANCE AND MUTUAL FUND INVESTORS

@article{Goetzmann1997COGNITIVEDA,
  title={COGNITIVE DISSONANCE AND MUTUAL FUND INVESTORS},
  author={William N. Goetzmann and N. Peles},
  journal={Journal of Financial Research},
  year={1997},
  volume={20},
  pages={145-158}
}
We present evidence from questionnaire responses of mutual fund investors about recollections of past fund performance. We find that investor memories exhibit a positive bias, consistent with current psychological models. We find that the degree of bias is conditional upon previous investor choice, a phenomenon related to the well-known theory of cognitive dissonance. Psychological and economic frictions in the mutual fund industry are examined via a cross-sectional study of equity mutual funds… 

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