Behavioral Finance: Are the Disciples Profiting from the Doctrine?

Abstract

We analyze 16 mutual funds that are self-proclaimed or media-identified disciples of behavioral finance to determine whether: (a) they successfully attract investment dollars and (b) their strategies earn abnormal returns for their investors. We find these funds are successfully attracting investment dollars, outperform S&P 500 index funds, load especially heavily on the HML factor, but fail to earn risk-adjusted abnormal returns. Our results suggest behavioral mutual funds are tantamount to value investing and not much more.

Keywords: behavioral finance, behavioral mutual funds, market efficiency, mutual funds, behavioral investing

JEL Classification: G11, G12, G14