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- The dumb money effect is the tendency of those investments chosen by dumb money (which largely means small private investors) to under-perform those chosen by smart money.
moneyterms.co.uk/dumb-money/
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Sep 11, 2022 · key takeaways. Because the “dumb money” group doesn't have access to teams of analysts or carefully compiled data, they often make trades based on instinct—and to buy and sell...
The dumb money effect is the tendency of those investments chosen by dumb money (which largely means small private investors) to under-perform those chosen by smart money. One of the most interesting pieces of research focuses on the flow of money into, and out or, mutual funds in the US.
Nov 1, 2015 · We investigate the dual notions that “dumb money” exacerbates well-known stock return anomalies and “smart money” attenuates these anomalies. We find that aggregate flows to mutual funds (dumb money) appear to exacerbate cross-sectional mispricing, particularly for growth, accrual, and momentum anomalies.
- Ferhat Akbas, Will J. Armstrong, Sorin Sorescu, Avanidhar Subrahmanyam
- 2015
Aug 30, 2023 · “Dumb money” indicators – retail buying, for example – uncover the movements of investors who are less knowledgeable or more emotionally driven. Smart-money investors also tend to have longer-term investment horizons and be professionals at mutual funds, hedge funds, and pension funds.
May 1, 2008 · We show that the dumb money effect is related to the value effect. This relation reflects return-chasing flows. A series of papers have documented a strong positive relation between mutual fund past performance and subsequent fund inflows (see, for example, Ippolito, 1992; Chevalier and Ellison, 1997; Sirri and Tufano, 1998).
- Andrea Frazzini, Owen A. Lamont
- 2008
May 30, 2024 · Some key traits of smart money investors: Do extensive due diligence before investing. Take calculated risks based on deep analysis. Have a proven track record of strong returns. Influential in setting pricing and market sentiment. Early investors that get in at low valuations. Patient, long-term holders with high risk tolerance.
In this paper, we provide clear evidence for the notion that dumb money exacerbates. stock market anomalies and smart money attenuates them. We use mutual fund flows as a proxy. for dumb money (Lou, 2012) and hedge fund flows as a proxy for smart money (Jagannathan, Malakhov, and Novikov, 2010).
