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Kauppakorkeakoulu | Rahoituksen laitos | Rahoitus | 2015
Tutkielman numero: 14081
Discovering behavioral biases in practice: Evidence from Finnish mutual fund managers
Tekijä: Rahkamaa, Mikko
Otsikko: Discovering behavioral biases in practice: Evidence from Finnish mutual fund managers
Vuosi: 2015  Kieli: eng
Laitos: Rahoituksen laitos
Aine: Rahoitus
Asiasanat: rahoitus; financing; osakemarkkinat; stock markets; sijoittajat; investors; instituutiot; institutions; käyttäytyminen; behaviour; luottamus; trust; virhe; error
Sivumäärä: 107
Avainsanat: behavioral biases; Finnish mutual fund managers; overconfidence; better-than-average effect; disposition effect; self-attribution bias; house money effect; status quo bias; illusion of knowledge; questionnaire
Tiivistelmä:
The main purpose of this study is to find out whether Finnish mutual fund managers are prone to behavioral biases. Additionally, some opinions of the mutual fund managers are asked in relation to overconfidence and investing. The following behavioral biases are investigated in this paper: overconfidence, disposition effect, self-attribution bias, house money effect, status quo bias, and illusion of knowledge. Overconfidence is further divided into better-than-average effect and overconfidence on a general level. Three of these studied behavioral biases have been found from mutual fund managers, or similar, before and they are: overconfidence, disposition effect, and house money effect. Thus, better-than-average effect, self-attribution bias, status quo bias, and illusion of knowledge have not been studied on mutual fund managers before. Therefore, this study tries to fill this gap in behavioral finance literature and provide valuable information to asset management industry about behavior and decision making of the Finnish mutual fund managers.

As the research method a quantitative questionnaire was selected. Target population for this survey was Finnish mutual fund managers working in Finland. Collecting the sample began in the beginning of December 2014 and the final answers were received on seventh of February 2015. Primary contact method was by phone. A total of 35 banks or asset management companies were contacted and 23 of these participated in the survey. There were in total of 57 mutual fund managers that completed the questionnaire. This gives a response rate of approximately 26%. It can be stated that this unique sample is a good representation of the entire population of the Finnish mutual fund managers. When analyzing the sample statistical methods were used. Most important information provided is histograms that present the percentage distribution of answers for each question and claim. In order to investigate how the different answers are related a Pearson's correlation matrix was used.

Based on my results it seems that Finnish mutual fund managers are prone to behavioral biases. On average it appears that the survey participants are subject to better-than-average effect, status quo bias and illusion of knowledge. Clearly more than half of the participants show quite strong signs of status quo bias and illusion of knowledge. There is also evidence that 44% of the participants might be subject to disposition effect to some extent. Furthermore, 23% of the Finnish mutual fund managers possibly exhibit, at least weakly, house money effect. Instead, the evidence is rather clear that the participants are not prone to overconfidence on a general level. Findings of the self-attribution bias are disregarded since it is possible that the respondents misunderstood how to answer questions related to it. The participants' opinions about overconfidence, on the other hand, suggest that overconfidence indeed is present in the work of the Finnish mutual fund managers.
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