Open‐Ended Mutual Funds: Misframing, “Hot Hands,” and Obfuscation Games

Hersh Shefrin

in Beyond Greed and Fear

Published in print October 2002 | ISBN: 9780195161212
Published online November 2003 | e-ISBN: 9780199832996 | DOI:

Series: Financial Management Association Survey and Synthesis Series

 Open‐Ended Mutual Funds: Misframing, “Hot Hands,” and Obfuscation Games

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Misframing and heuristic‐driven bias combine to confuse investors about the relative contributions of skill and luck in fund performance. Investors invariably attribute excessive weight to skill, and consequently they tend to overweight the importance of an individual fund's track record. Moreover, open‐end mutual funds companies tend to play to investors' weaknesses by inducing opaque frames.

Keywords: framing; heuristic‐driven bias; Peter Lynch; obfuscation games; representativeness

Chapter.  6409 words.  Illustrated.

Subjects: Financial Markets

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