What Do Mutual Fund Investors Really Care About?

Itzhak Ben-David, Jiacui Li, Andrea Rossi, Yang Song

Research output: Contribution to journalArticlepeer-review

42 Scopus citations


We show that mutual fund investors rely on simple signals and likely do not engage in sophisticated learning about managers' alpha as widely believed. Simplistic performance chasing best explains aggregate flows to the mutual fund space and flows across funds. These results hold for both actively managed and passive index funds. Empirical patterns commonly interpreted as reflecting learning about managerial skill also appear in falsification tests and are mechanical. Our results are consistent with the view that, on average, households are homo sapiens with limited financial sophistication rather than hyperrational alpha-maximizing agents, as often assumed in the literature.

Original languageEnglish (US)
Pages (from-to)1723-1774
Number of pages52
JournalReview of Financial Studies
Issue number4
StatePublished - Apr 1 2022


  • G11
  • G24
  • G41
  • G53

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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