Past Performance is Indicative of Future Beliefs

  title={Past Performance is Indicative of Future Beliefs},
  author={Philip Z. Maymin and Gregg S. Fisher},
  journal={Household Finance eJournal},
The performance of the average investor in an asset class lags the average performance of the asset class itself by an average of one percent per year over the past fifteen years, based on net investor mutual fund cash flows. We present a model in which a representative behavioral investor believes next year's returns will exactly match last year's returns and show that this leads to price adjustments on what would otherwise be random walk securities that effectively lower the future return of… 
4 Citations
Building a More Tax-Efficient Portfolio: The Gerstein Fisher Tax-Managed Equity Strategy
When selecting investments with which to implement their strategic asset allocations, many investors rely on low-cost, passively managed index funds. Though more tax efficient than many active
advising the Behavioral Investor: Lessons from the real World
U.S. President Franklin Delano Roosevelt, during his first inaugural address in 1933, stated that “The only thing we have to fear is fear itself.” He made this statement when the country was in the
Return Chasing and Trend Following: Superficial Similarities Mask Fundamental Differences
Return chasing is often cited as one of the primary behavioral foibles of investors, resulting in sub-par returns. Surprisingly, the literature does not provide a generally accepted and testable
Putting a value on your value: Quantifying Vanguard Adviser's Alpha
This paper takes the Adviser's Alpha framework further by attempting to quantify the benefits that advisers can add in an Australian context relative to others who are not using such strategies.


The (Bad?) Timing of Mutual Fund Investors
This paper provides a new look at the timing of mutual fund investors. We re-examine the relationship between investors' aggregate net flows into and out of the funds and the returns of the funds in
Higher Risk, Lower Returns: What Hedge Fund Investors Really Earn
The returns of hedge fund investors depend not only on the returns of the funds they hold but also on the timing and magnitude of their capital flows in and out of these funds. We use dollar-weighted
On Estimating the Expected Return on the Market: An Exploratory Investigation
What are Stock Investors' Actual Historical Returns? Evidence from Dollar-Weighted Returns
The existing literature typically does not differentiate between security returns and the returns of investors in these securities. This study clarifies that investor and security returns differ
Any regulation of risk increases risk
We show that any objective risk measurement algorithm mandated by central banks for regulated financial entities will result in more risk being taken by those financial entities than would otherwise
Dumb Money: Mutual Fund Flows and the Cross-Section of Stock Returns
Quantitative analysis of investor behavior 2010, 2010, available at:
  • Quantitative analysis of investor behavior 2010, 2010, available at: