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Are Australian Investors Smart?

Author

Listed:
  • Philip Gharghori

    (Department of Accounting and Finance, Monash University, Clayton Campus, Melbourne, VIC 3800.)

  • Charly Sujoto

    (Department of Accounting and Finance, Monash University, Clayton Campus, Melbourne, VIC 3800.)

  • Madhu Veeraraghavan

    (Department of Accounting and Finance, Monash University, Clayton Campus, Melbourne, VIC 3800.)

Abstract

This paper examines the smart money effect on Australian superannuation funds. Specifically, we investigate whether Australian investors make smart choices in selecting funds. We build on previous research which shows that sophisticated investors have the ability to invest in funds that subsequently perform well. Our findings deviate from the existing literature in that we fail to uncover supporting evidence for a smart money effect in the Australian superannuation fund industry. However, we do find some evidence of investors who are able to identify funds whose future performance will be poor and who disinvest accordingly. Our findings have serious policy implications, as we show that investors generally are not able to recognise high performing superannuation funds.

Suggested Citation

  • Philip Gharghori & Charly Sujoto & Madhu Veeraraghavan, 2008. "Are Australian Investors Smart?," Australian Journal of Management, Australian School of Business, vol. 32(3), pages 525-544, March.
  • Handle: RePEc:sae:ausman:v:32:y:2008:i:3:p:525-544
    DOI: 10.1177/031289620803200308
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    File URL: https://journals.sagepub.com/doi/10.1177/031289620803200308
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    References listed on IDEAS

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    1. Kathryn A. Holmes & Robert W. Faff, 2004. "Stability, Asymmetry and Seasonality of Fund Performance: An Analysis of Australian Multi‐sector Managed Funds," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(3‐4), pages 539-578, April.
    2. Lu Zheng, 1999. "Is Money Smart? A Study of Mutual Fund Investors' Fund Selection Ability," Journal of Finance, American Finance Association, vol. 54(3), pages 901-933, June.
    3. Kathryn A. Holmes & Robert W. Faff, 2004. "Stability, Asymmetry and Seasonality of Fund Performance: An Analysis of Australian Multi‐sector Managed Funds," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(3‐4), pages 539-578, April.
    4. Richard A. Ippolito, 1989. "Efficiency with Costly Information: A Study of Mutual Fund Performance, 1965–1984," The Quarterly Journal of Economics, Oxford University Press, vol. 104(1), pages 1-23.
    5. Sawicki, Julia & Ong, Fred, 2000. "Evaluating managed fund performance using conditional measures: Australian evidence," Pacific-Basin Finance Journal, Elsevier, vol. 8(3-4), pages 505-528, July.
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    Cited by:

    1. Su (Sally) Gan & Richard Heaney & Paul Gerrans, 2015. "Individual investor portfolio performance in retirement savings accounts," Australian Journal of Management, Australian School of Business, vol. 40(4), pages 652-671, November.
    2. Luo Wang & Bin Li & Benjamin Liu, 2017. "Can Macroeconomic Variables Explain Managed Fund Returns? The Australian Case," Economic Papers, The Economic Society of Australia, vol. 36(2), pages 171-184, June.
    3. John Watson & James Delaney & Michael Dempsey & J. Wickramanayake, 2016. "Australian superannuation (pension) fund product ratings and performance: A guide for fund managers," Australian Journal of Management, Australian School of Business, vol. 41(2), pages 189-211, May.
    4. Paul Gerrans, 2012. "Retirement savings investment choices in response to the global financial crisis: Australian evidence," Australian Journal of Management, Australian School of Business, vol. 37(3), pages 415-439, December.
    5. Peng, Xiaowen & Alpert, Karen & Hsu, Grace Chia-Man, 2020. "Switching between superannuation funds: Does performance and marketing matter?," Pacific-Basin Finance Journal, Elsevier, vol. 63(C).

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