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Timing Intelligence? A Response From Dalbar

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It is unfortunate that this article misses the central point that the Quantitative Analysis of Investor Behavior (“QAIB”) measures the mutual fund investor experience and not the areas raised as concerns. In fact, the author admits by his ignorance of its contents that he has not read the report that he so roundly criticizes.


The fundamental flaw in the critique is that the term “investor return” defined in QAIB is very different the use of the same term in the article. In QAIB, “investor return” is the difference between the net paid in and the current value. This is what the investor experiences.

May I suggest that the author actually read the report and replace the assumptions and guesses with the actual contents of the report? As an indication of how far off the mark this article is, the following suppositions contained in the article are answered with facts.

Supposition #1.

Dalbar’s Quantitative Analysis of Investor Behavior… is “proof” that mutual fund investors have historically made poor market-timing decisions.


The report is a quantitative representation of investor experience. While there is evidence of the negative effect of market-timing, it is not offered as proof of poor market-timing decisions. The report presents the contrast between what investors experience in their own accounts and what is published about the funds they own.

The QAIB report suggests that the investor experience is in part attributable to poor market timing decisions, but this is only one of several factors that account for the investor’s experience of underperformance.

Supposition #2.

DALBAR does not publicly disclose its approach


Dalbar publishes the methodology in its report and has done so since the first edition. This methodology is delivered to every buyer of the report. Low priced extracts have been made that do not include the methodology.

Instead of guessing at what the approach is, interested persons can simply purchase the report.

Supposition #3.

I use a transparent and industry-accepted methodology, based on publicly available data, to demonstrate that investors’ returns have not been nearly as bad as DALBAR claims.


Dalbar’s QAIB report seeks to quantify the investor experience which not provided by any other industry-accepted methodology. The results are by definition different as is evidenced by the fact that investor surveys show a perceived gap between industry-reported returns and the investor’s own experience.

By Louis S. Harvey, read the full article here.

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