TY  - JOUR
AU  - Glode,Vincent
AU  - Hollifield,Burton
AU  - Kacperczyk,Marcin
AU  - Kogan,Shimon
TI  - Is Investor Rationality Time Varying? Evidence from the Mutual Fund Industry
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15038
PY  - 2009
Y2  - June 2009
UR  - http://www.nber.org/papers/w15038
L1  - http://www.nber.org/papers/w15038.pdf
N1  - Author contact info:
Vincent Glode
University of Pennsylvania, Wharton School
E-Mail: vglode@wharton.upenn.edu

Burton Hollifield
Carnegie Mellon University
Tepper School of Business
5000 Forbes Avenue
Pittsburgh, PA 15213
Tel: 412-268-6505
E-Mail: burtonh@andrew.cmu.edu

Marcin Kacperczyk
Stern School of Business
New York University
44 West 4th Street
KMC 9-190
New York, NY 10012
Tel: 212/998-0924
E-Mail: mkacperc@stern.nyu.edu

Shimon Kogan
Finance Department
McCombs School of Business
University of Texas at Austin
1 University Station  B6600
Austin, TX  78712
E-Mail: shimon.kogan@mccombs.utexas.edu
AB  - We provide new empirical evidence suggesting that the marginal investor in mutual funds behaves differently across market conditions. If the marginal investor allocates capital across mutual funds rationally, then the relative performance of funds should be unpredictable. We find however that relative fund performance is predictable after periods of high market returns but not after periods of low market returns. The asymmetric predictability in performance we document cannot be explained by time-varying differences in transaction costs or style exposures between funds, or by sample selection. Consistent with the hypothesis that the asymmetric predictability in performance may be driven by unsophisticated investors' mistakes when allocating capital, we document that performance predictability is more pronounced for funds that cater to retail investors than for funds that cater to institutional investors.
ER  -