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Overconfidence Among Professional Investors: Evidence from Mutual Fund Managers
Author(s) -
Puetz Alexander,
Ruenzi Stefan
Publication year - 2011
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.2010.02237.x
Subject(s) - overconfidence effect , mutual fund , tournament , equity (law) , portfolio , incentive , business , economics , monetary economics , financial economics , finance , microeconomics , psychology , social psychology , mathematics , combinatorics , political science , law
We examine overconfidence among equity mutual fund managers. While overconfidence has been extensively documented among retail investors, evidence from professional investors is scarce. Consistent with theories of overconfidence, we find that fund managers trade more after good past performance. The higher trading activity after good performance is driven by individual portfolio performance, while the market performance has no significant impact. We rule out some alternative explanations for our results like increased trading as a response to tournament incentives, as a response to inflows, or as a rational reaction due to managerial learning about abilities.