Behavioural Finance: Application to Investors and Managers in Spanish Mutual Funds

Author(s): Cristina Ortiz Lzaro

Source: Revista Espaola de Financiacin y Contabilidad, Vol. 36, No. 136 (octubre-Diciembre 2007
), pp. 827-829
Published by: Taylor & Francis, Ltd.
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ESPAOLA
DEFINANCIACIN
Y CONTABILIDAD
REVISTA
Vol.XXXVI,
n.136 octubre-diciembre
2007 pp.827-830

Behavioural

Finance:
to

Application
in

TESISDOCTORALES
827

Spanish

Investors

Mutual

and

Managers

Funds

Lzaro.
REALIZADA
POR Cristina
Ortiz
POR LuisFerrazAgudo.
DIRIGIDA
FECHADE LECTURA15dejuniode 2007.
DE CELEBRACIN
Universidad
de Zaragoza.
LUGAR
Lamothe
Fernndez
TRIBUNAL
(Presidente).
Prosper
JosLuisSartoMarzal(Secretario).
JuanMascareas
(Vocal).
Prez-igo
Marn(Vocal).
JosLuisMartn
HilMer
(Vocal).
Joseph

butithasentetheefficient
market
hypothesis,
redso firmly
thatitseemsitis goingtostayfor
Thedevelopment
ofthisessayis motivated
by long;infact,somewavesofopinion
pointitout
of researchin finance. as a new
the new tendencies
inthenearfuture.
Thenew
discipline
consider
thatbehavioural
manyauthors
Though
processes
approach
making
arguesthatdecision
theacademic
interest cannotbebuilt onthe
finance
isstillinitsinfancy
ofa ratioup
assumption
situation
andthepresent
is growing
rapidly
jus- nalinvestor
andoffers
alternative
perspectives
arenotalwaysefficient from
tifies
thiswork.Markets
research
field.
thepsychological
do notalwaysactas theyare
andparticipants
Fromthelate1950sandearly1960stheModern
thegoalof
thisframework,
to.Within
supposed
theframework
Portfolio
has dominated
Theory
of
a better
thisThesisis getting
understanding
withfourfoundation
blocks:
ofstandard
finance
howinvestors
and managers
ofmutualfunds
ofthe
ofinvestors,
theefficiency
therationality
deciinformation
andtakeinvestment
interpret
as
themean-variance
markets,
portfolio
theory
sions.
and theCapital
theruleto designportfolios,
in AssetPricing
thefuture
Recentresearch
and,apparently,
Inanefficient
marModel(CAPM).
willbe basedonmulti-disci-ket(Fama,1965)pricesrepresent
research
academic
time
atevery
mustopen a goodestimate
Researchers
oftheintrinsic
plinaryapplications.
value;butittook
areastogetmoreconsis- longforthemodeltobe accepted
minds
torelated
their
byacademics
In this sincea seriesofreturn
tentand usefulresultsto thesociety.
anomalies
appearedin
of thelate1970sandearly1980s.Forthesereaworkis theapplication
sense,thisempirical
inthepsychological
rese- sons,someacademics
andfindings
theories
of
claimforthenecessity
data.Thisis especially alternative
archfieldto financial
modelsthatrelax some of the
forthesampleanalysed
ofmodern
giventhat assumptions
interesting
portfolio
theory.
forthe Inthis
areslightly
thiskindofstudies
developed
thecritics
from
thebehadebate,
ongoing
mutual
fund
Spanish
industry.
concern
themaincorvioural
finance
approach
in nerstone
finance
has recently
thatis
Behavioural
ofthetheory
ofefficient
markets,
emerged
toexplain to say,the existence
of a rationalindividual
studies
as a newparadigm
academic
Rational
investors
investment
decisions.
theanomalies
foundwhenempirically
testing taking
CONCEPTUALFRAMEWORK

ISSN:
deEmpresas
0210-2412
deContabilidad
2001
Asociacin
Espaola
yAdministracin
Copyright

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All use subject to JSTOR Terms and Conditions

828 TESISDOCTORALES
inparticular,
morewealththanless,theyare indiffe- tomodify
their
toanalyprefer
portfolios,
rentwhether
a lossis labelleda paperlossora
se the risk-taking
behaviour
of mutualfund
realised
newinforma- managers
in response
to theirrelative
loss,andthey
incorporate
perforInvestors
tionto theirpredictions.
thatdo not mance.Thisbehaviour
has beendenominated
areconsidered
thesefeatures
noise 'tournament
behaviour'
sincethe pioneering
accomplish
tra- workofBrown,
traders
Harlow
andStarks
1953),whoseirrational
(Friedman,
(1996).Inthis
inthelongrunbyefficient case,managers
wouldbeaffected
dingis compensated
bythepsychotobe abletosustain
theidea logicalbias defined
rational
in theProspect
of
arbitrage
Theory
markets.
Thenormative
theories
ofefficient
and Tversky
that
pro- Kahneman
(1979) suggests
howindividuals
should
actseemtobe
individuals
tendtolockingainsandgambleon
posing
becausecomplete
losingweight
rationality
only losses.
existsin modelsbutit is notvalidforactual Thecentral
isthatinterim
loserstend
hypothesis
behaviour.
Investors
and managersare not toincrease
theriskoftheir
morethan
portfolios
ofhowhumanemotions
and interim
alwaysconcerned
winners
after
a performance
assessment
biasesmayaffect
their
investment
decicognitive
is tested
a year.Thishypothesis
periodwithin
sions.In dailytrading,
agentsmakemistakes, with
twomethods,
thenon-parametric
methododealwithemotions,
and
information,
interpret
withrankings
tothemediancriaccording
have some prefixed
ideas aboutthe reality. logy
terion
andwiththequartile
This
classification.
thenoisetrading
Therefore,
previously
quoted lastmethod
enables
ustoenlarge
thehypotheses
infinancial
is notso abnormal
markets
andwe
suchas theexistence
ofcareerrisksif
tested,
ofa normal
withinherent
couldthink
investor
fallconsistently
behindthe market,
the
they
thana rational
investor.
biases,rather
cognitive
confidence
of
with
managers
good
in theirsurvey
MeirStatman
of increasing
(2005)affirms
Investors
werenormal
rational
investors:
befo- performance.
factors
are considered
withpanel
intheearly Additional
re theyweredescribed
as rational
inthissensewe testforthe
datamethodology,
remain
normal
1960s,andthey
today.
effect
ofsize,age,priorlevelofrisk(giventhe
cannotsystemaconstraints,
portfolio
managers
METHODOLOGY
increase
theriskoftheportfolios).
tically
The empirical
studyis focusedon twomain Inallthe
weconsidered
the
presented,
analyses
and
parts:Spanishmutualfundsinvestors'
effect
ofdifferent
thusthe1994sample
periods,
behaviour.
investors'
attimanagers'
Regarding
2004isa period
thatincludes
a dramatic
growth
tudeswhenfacing
financial
investment
decisions
of
the
mutual
fund
in
Spain.
industry
twodatabasesareusedtoprovide
a widepersdomestic
funds
andmoney
marpective:
equity
ketfunds.
Similar
isapplied
toboth CONCLUSIONS
methodology
individual
OLS regressions, Regarding
thefirst
theinvestors'
samplesincluding
partfrom
point
cross-section
ormulti- ofview,
individual
studies
ofOLSregressions
for
non-parametric
analysis
variateregressions
totrytofitthebestmodel. different
variables
haveproved
thatpastreturn
Thegoalis detecting
thefactors
thatinfluence is themostimportant
factor
forinvestors
when
mostinvestors'
decisions
and approaching
the taking
investment
thecomdecisions.
However,
thatin previous puting
performance-flow
relationship
is different
fortwotypesoffunds.
period
studieshas been shownto be asymmetric Domestic
focuson last
equityfunds'investors
and Peles,1997; Chevalier
and yearreturn,
(Goetzmann
formoney
whilst
market
fundthe
Ellison,
1997;andSirriandTufano,
1998).This periodis reducedup to 3-month
pastreturn.
meansthatinvestors
flock According
disproportionately
to financial
risk
portfolio
theory,
intofunds
withgoodperformance
whilst
failto should
be alsoconsidered
toevaluate
portfolios,
withdraw
in thesameproportion
fromfunds butitfailstobe a significant
variable
formoney
withpoorperformance.
market
duetothespecific
funds
characteristics
Themanager's
Theevaluation
ofriskforequity
behaviour
is alsoapproached
by ofthesefunds.
twodifferent
Weaimtoprovide funds
differs
from
theevaluation
inthe
ofreturn
methodologies.
evidence
ofthemanagers'
incentives timehorizon
forcomputing
thevariables.
It is
empirical

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TESISDOCTORALES
829
othervariables,
the
foundthatthe levelsof riskare forlonger bear markets.
Regarding
oftime.Thesedifferences
should
behad risklevelofthefirst
periods
partoftheyearnegatively
inmindwhenresuming
return
andriskinone influences
thesubsequent
riskexposure;
and
measure.
Thatis,better
results
are larger
funds
tendtogamble
toa greater
extent.
performance
infortheModified
obtained
SharpeRatioanaly- Resumen:
La TesisDoctoral
escrita
ydefendida
return
siswhentheratioincludes
andriskcom- en
encontexto
dedoctorado
tamEuropeo
ingls
timeperiods.
putedfordifferent
encastellano
bincontiene
unresumen
parasu
Cross-sectional
timeseriesregressions
De formamuysinttica,
provide completadifusin.
additional
evidence
oftheframework
ofinves- podramos
decirque el objetivo
de la tesises la
tors'decisions.
Custodial
andmanagement
fees divulgacin
delosnuevos
paradigmas
recogidos
havebeenshownto be a deterrent
to inves- bajo la perspectivade las Finanzas del
forthemoney
market
funds. Comportamiento.
tments,
especially
Theflows
ofmoney
andinvestors
arealsosigniTrasunrepasoporsuevolucin
ysucomparatirelated
tothelevelofflowintothecateficantly
va conlas FinanzasClsicasy una descripcin
Thatis tosaythatflows
intoindigoryoffunds.
de inversin
la
delmercado
espaolde fondos
vidualfundsdepend,to someextent,
to the
Tesis desarrollacuatrocaptulosempricos.
ofthecategory,
eitherdomestic
growth
equity Dichoanlisis
dospartes:
el
emprico
comprende
funds
ormoney
market
funds.
de
anlisisdelpartcipe
de fondos
y delgestor
in inversin.
offund
theeffect
funds
size,larger
Regarding
Enel anlisis
delinversor
se aprecian
more
difficulties
to
than
smaller
have
Spain
grow
la reaccin
delpartcipe
defondiferencias
entre
funds
inrelative
terms.
thesituation
is
However,
derenta
dosdeinversin
variable
nacional
yfonmarket
funds
inthesecond dosmonetarios.
formoney
different
thatfund
sizeisnotso
partofthesampleperiod
existen
multitud
de circunstancias
because
the
is
more
consoli- Endefinitiva,
important
industry
en
el
mercado
de fondos
en
las
los
que
agentes
Theeffect
datedandtherearenotnewfunds.
of
de
inversin
no
actan
conforme
la
racionalidad
funds
orbelonging
toa fund
beingstand-alone
delasfinanzas
clsicas.
Itseemsthatfund financiera
hasalsobeenanalysed.
family
in
size
is
not
determinant
the
data
panel
complex
Whenindividual
analyseshavebeen REFERENCES
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Flexible
Milton,
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USA:
inPositive
Economics,
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isfocused
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