Motilal Oswal Asset Management Company Ltd. (MOAMC) is a public limited company incorporated under the Companies Act, 1956 on November 14, 2008, having its Registered Office at 10th Floor, Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai - 400025.
Motilal Oswal Asset Management Company Ltd. has been appointed as the Investment Manager to Motilal Oswal Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated May 21, 2009, executed between Motilal Oswal Trustee Company Ltd. and Motilal Oswal Asset Management Company Ltd.
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Motilal Oswal Asset Allocation Passive Fund of Fund – Aggressive (G) - 10.6741Motilal Oswal Asset Allocation Passive Fund of Fund – Aggressive-Dir (G) - 10.6893Motilal Oswal Asset Allocation Passive Fund of Fund – Conservative (G) - 10.5364Motilal Oswal Asset Allocation Passive Fund of Fund – Conservative-Dir(G) - 10.5532Motilal Oswal Dynamic Fund (Div-A) - 13.5064Motilal Oswal Dynamic Fund (Div-Q) - 12.0966Motilal Oswal Dynamic Fund (G) - 14.9036Motilal Oswal Dynamic Fund-Dir (Div-A) - 13.6715Motilal Oswal Dynamic Fund-Dir (Div-Q) - 12.2594Motilal Oswal Dynamic Fund-Dir (G) - 15.7315Motilal Oswal Equity Hybrid Fund - Direct (G) - 14.9593Motilal Oswal Equity Hybrid Fund - Regular (G) - 14.3119Motilal Oswal Flexi Cap Fund(D) - 24.9521Motilal Oswal Flexi Cap Fund(G) - 33.1944Motilal Oswal Flexi Cap Fund-Dir(D) - 24.9694Motilal Oswal Flexi Cap Fund-Dir(G) - 35.5144Motilal Oswal Focused 25 Fund - Direct (D) - 20.4246Motilal Oswal Focused 25 Fund - Direct (G) - 34.8895Motilal Oswal Focused 25 Fund (D) - 18.3723Motilal Oswal Focused 25 Fund (G) - 31.3034Motilal Oswal Large and Midcap Fund - Dir (D) - 15.0008Motilal Oswal Large and Midcap Fund - Dir (G) - 15.0008Motilal Oswal Large and Midcap Fund (D) - 14.57Motilal Oswal Large and Midcap Fund (G) - 14.57Motilal Oswal Liquid Fund - Direct (Div-D) RI - 10.0077Motilal Oswal Liquid Fund - Direct (Div-F) RI - 10.0068Motilal Oswal Liquid Fund - Direct (Div-M) - 10.0442Motilal Oswal Liquid Fund - Direct (Div-Q) - 10.0694Motilal Oswal Liquid Fund - Direct (Div-W) RI - 10.0083Motilal Oswal Liquid Fund - Direct (G) - 11.1042Motilal Oswal Liquid Fund - Regular (Div-D) RI - 10.0055Motilal Oswal Liquid Fund - Regular (Div-F) RI - 10.0066Motilal Oswal Liquid Fund - Regular (Div-M) - 10.0434Motilal Oswal Liquid Fund - Regular (Div-Q) - 10.0663Motilal Oswal Liquid Fund - Regular (Div-W) RI - 10.0154Motilal Oswal Liquid Fund - Regular (G) - 11.0628Motilal Oswal Long Term Equity Fund (D) - 18.9673Motilal Oswal Long Term Equity Fund (G) - 24.1448Motilal Oswal Long Term Equity Fund -Dir (D) - 22.5586Motilal Oswal Long Term Equity Fund -Dir (G) - 26.3202Motilal Oswal Midcap 30 Fund (D) - 21.9396Motilal Oswal Midcap 30 Fund (G) - 35.9137Motilal Oswal Midcap 30 Fund-Dir (D) - 22.6487Motilal Oswal Midcap 30 Fund-Dir (G) - 39.3237Motilal Oswal Multi Asset Fund - Direct (G) - 10.7049Motilal Oswal Multi Asset Fund (G) - 10.5652Motilal Oswal Nasdaq 100 FOF - Direct (G) - 21.7182Motilal Oswal Nasdaq 100 FOF - Regular (G) - 21.4982Motilal Oswal Nifty 50 Index Fund - Direct (G) - 13.1123Motilal Oswal Nifty 50 Index Fund (G) - 13.0304Motilal Oswal Nifty 500 Fund - Direct (G) - 15.2785Motilal Oswal Nifty 500 Fund (G) - 15.1033Motilal Oswal Nifty Bank Index Fund - Direct (G) - 12.6493Motilal Oswal Nifty Bank Index Fund (G) - 12.505Motilal Oswal Nifty Midcap 150 Index Fund (G) - 17.9037Motilal Oswal Nifty Midcap 150 Index Fund-Dir (G) - 18.1149Motilal Oswal Nifty Next 50 Index Fund - Dir (G) - 13.6955Motilal Oswal Nifty Next 50 Index Fund (G) - 13.5607Motilal Oswal Nifty Smallcap 250 Index Fund (G) - 18.3538Motilal Oswal Nifty Smallcap 250 Index Fund-Dir(G) - 18.5688Motilal Oswal S&P 500 Index Fund - Direct (G) - 14.0875Motilal Oswal S&P 500 Index Fund (G) - 13.9767Motilal Oswal Ultra Short Term Fund - Dir (Div-D) - 9.91Motilal Oswal Ultra Short Term Fund - Dir (Div-F) - 9.9314Motilal Oswal Ultra Short Term Fund - Dir (Div-M) - 9.9171Motilal Oswal Ultra Short Term Fund - Dir (Div-Q) - 10.0598Motilal Oswal Ultra Short Term Fund - Dir (Div-W) - 9.921Motilal Oswal Ultra Short Term Fund - Dir (G) - 14.0415Motilal Oswal Ultra Short Term Fund (Div-D) - 9.8772Motilal Oswal Ultra Short Term Fund (Div-F) - 9.8877Motilal Oswal Ultra Short Term Fund (Div-M) - 9.8777Motilal Oswal Ultra Short Term Fund (Div-Q) - 10.0212Motilal Oswal Ultra Short Term Fund (Div-W) - 9.8807Motilal Oswal Ultra Short Term Fund (G) - 13.6038

Be it Cricket or Investing: Recency Bias clouds decision making

Blog Blog Details
  • March 19, 2021
  • Umang Thaker|
  • Head of Products
English all-rounder Ben Stokes played a major role in England’s win over New Zealand in the World Cup final at Lord’s, scoring 84 and taking the game into a super over, where they clinched a remarkable victory. He followed it up with a breathtaking 135 not-out in the 3rd Ashes test at Headingley, taking England to an improbable one-wicket victory in August’19.

More than 1,000 England cricket fans were surveyed by the Professional Cricketers’ Association and NatWest in honour of the 50th anniversary of the Professional Cricketers Association (PCA) Awards in October’19 where they were asked to rank greatest performances in the last 50 years of England Cricket. Little wonder that both of Stokes’ performances made it to the top 50 list. 

Closer to home, there was a raging debate about India’s first choice wicket keeper in India’s four-match Border-Gavaskar series to be played down under. Prior to the tour, Wriddhiman Saha was, without a doubt, a far better keeper than Pant. But Pant who had 2 overseas hundreds and 2 nineties against his name – and had failed in 18 of his last 22 innings got a nod in the second test and the rest is history. KL Rahul, got a test recall as a stand in keeper-batsman on the back of a brilliant IPL.

And after the first T20 match, the batting form of Indian skipper Virat Kohli was being questioned. On 12th of March, 2020, he surpassed Ganguly’s unwanted record for the maximum number of ‘ducks’ in international cricket(13). 

The above outcomes have a clear imprint of ‘recency bias’. 

a)But for recency bias and the English fans would have considered Graham Gooch’s 154 not out against West Indies at Headingley in 1991, when the series was at stake or Mike Atherton’s Johannesburg vigil in 1995/96, which led to a win or Kevin Pietersen’s 186 at Mumbai in 2012/13 above Stokes’ efforts. 

b)Indian selectors would not have handed a Test-match recall to KL Rahul, on the basis of his ‘white ball’ IPL performance.

c)And those criticising Kohli would do well to remember his feats while chasing down targets. Kohli has scored 5388 runs at a stupendous average of 96.21 with a strike rate of 97.77 while chasing in ODI’s. He also answered his critics with a swashbuckling 73 of 49 balls on 14th march and became the first batsman in world cricket to score 3000+ runs in T20 internationals. (average 50.86) 

Likewise, investors too fall victim to ‘Recency Bias’, by giving more importance to near term performance over long term performance. 

“In God we trust, all others must bring data” said W. Edwards Deming. Deming, a champion of using data and measurement, suggested that problems should be solved through robust data collection and analysis.
 
So here is the data. We analysed the performance of all equity mutual fund schemes for consecutive 3 year periods and ranked them. We then calculated the correlation between these ranks. Two specific results present important lessons for investors who tend to invest in the best performing fund. 




1.The best performing scheme of one 3 year period, say 2014-16 was ranked as low as 223rd in the subsequent 3 year period - 2017-19.

2.The negative and low correlation between the ranks for different 3 year periods indicate that choosing the best performing scheme cannot guarantee superior long term performance.  

Like in cricket, recency bias in investing leads investors to extrapolate patterns and make projections based on near term performance. Funds that have delivered spectacular returns in the recent past appear unduly attractive. A better approach would be to first choose a fund house with a defined investment philosophy, stick to asset allocation and evaluate the long term track record. 

*Data points sourced from Cricket365, Skysports.com, www.thehundred.com, Guardian and other publicly available sources.

Disclaimer:
This article has been issued on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this document is for general purposes only and not a complete disclosure of every material fact. The information/data herein alone is not sufficient and shouldn’t be used for the development or implementation of an investment strategy. It should not be construed as investment advice to any party. All opinions, figures, estimates and data included in this article are as on dates mentioned. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. The statements contained herein may include statements of future expectations and other forward-looking statements that are based on our current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Readers shall be fully responsible/liable for any decision taken on the basis of this article. 

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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