Bounded Rationality in the Sale and Purchase of Managed Funds

Macquarie Journal of Business Law, Vol. 9, pp. 88, 2012

26 Pages Posted: 18 Jun 2012

See all articles by Rhys Bollen

Rhys Bollen

Monash University - Faculty of Law

Date Written: May 1, 2012

Abstract

The under-use of lower cost and higher performing passively managed funds by consumers appears to be an example of market failure that is leading to consumer detriment. These investing decisions do not appear to be economically rational behavior by investors. This article considers some possible explanations for this phenomenon from the behavior finance literature, and proposes some possible public policy responses.

Keywords: bounded rationality, behavioural finance, market failure, managed fund, mutual fund, index fund, active fund, passive fund

Suggested Citation

Bollen, Rhys A., Bounded Rationality in the Sale and Purchase of Managed Funds (May 1, 2012). Macquarie Journal of Business Law, Vol. 9, pp. 88, 2012, Available at SSRN: https://ssrn.com/abstract=2086009

Rhys A. Bollen (Contact Author)

Monash University - Faculty of Law ( email )

Wellington Road
Clayton, Victoria 3800
Australia

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