Do UK Retail Investors Buy at the Top and Sell at the Bottom?

22 Pages Posted: 5 Feb 2016

See all articles by Andrew Clare

Andrew Clare

City University London - Sir John Cass Business School

Nick Motson

City University London - Sir John Cass Business School

Date Written: September 5, 2010

Abstract

In this paper we examine market level data on the net investment into broad categories of UK mutual funds (known as unit trusts) collated by the Investment Management Association (IMA). We use these data to calculate a measure known as the 'performance gap' that is used by both Friesen and Sapp (2007) and by Dichev and Yu (2009). Our data spans the period from 1992 to the end of 2009 and therefore represents a significant sample period over which to study this phenomenon. Our results are broadly in keeping with those of previous research in this area, which has been achieved using US mutual fund data. The UK data that we use here suggest that on average the investment timing decisions of retail investors with regard to equity mutual funds has cost them performance of just under 1.2% per year over the eighteen year period of our study.

Keywords: investor timing, mutual fund performance, fund cash flows

JEL Classification: G23, G14

Suggested Citation

Clare, Andrew D. and Motson, Nicholas E., Do UK Retail Investors Buy at the Top and Sell at the Bottom? (September 5, 2010). Available at SSRN: https://ssrn.com/abstract=2728214 or http://dx.doi.org/10.2139/ssrn.2728214

Andrew D. Clare

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Nicholas E. Motson (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 (0) 20 7040 4074 (Phone)
+44 (0) 20 7040 8881 (Fax)

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