TY  - JOUR
AU  - Greenwood,Robin
AU  - Nagel,Stefan
TI  - Inexperienced Investors and Bubbles
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14111
PY  - 2008
Y2  - June 2008
UR  - http://www.nber.org/papers/w14111
L1  - http://www.nber.org/papers/w14111.pdf
N1  - Author contact info:
Robin Greenwood
Harvard Business School
Baker Library 267
Soldiers Field
Boston, MA 02163
Tel: 617/495-6979
Fax: 617/496-8443
E-Mail: rgreenwood@hbs.edu

Stefan Nagel
Stanford University
Graduate School of Business
655 Knight Way
Stanford, CA  94305
Tel: 650/724-9762
Fax: 650/725-7979
E-Mail: nagel_stefan@gsb.stanford.edu
AB  - We use mutual fund manager data from the technology bubble to examine the hypothesis that inexperienced investors play a role in the formation of asset price bubbles. Using age as a proxy for managers' investment experience, we find that around the peak of the technology bubble, mutual funds run by younger managers are more heavily invested in technology stocks, relative to their style benchmarks, than their older colleagues. Furthermore, young managers, but not old managers, exhibit trend-chasing behavior in their technology stock investments. As a result, young managers increase their technology holdings during the run-up, and decrease them during the downturn. Both results are in line with the behavior of inexperienced investors in experimental asset markets. The economic significance of young managers' actions is amplified by large inflows into their funds prior to the peak in technology stock prices.
ER  -