Relationship of Fund Returns and Volatility with Investor Greed and Fear

In this paper, the sentiments of greed and fear experienced by fund investors are quantified from the perspective of behavioral finance, and then used to separately examine the impact that fund investors and market investors have on fund returns and volatility. The empirical results indicate that fund investor greed and fear mutually influence each other. We also find that fund investor behaviors arising from greed and fear are reflected in the fund returns. Additionally, a panicky atmosphere among market investors has a negative effect on fund returns.