Morningstar is now measuring this for fund categories, which is very helpful. They note that due to adverse timing (!), recent attempts by investors to 'chase' market returns have hurt them:
In 2010, the average domestic fund earned a return of 18.7% compared with 16.7% for the average fund investor, making for a gap of 200 basis points. For the trailing three years, that gap was 128 basis points. For the past five years, it was 98 basis points, and for the past 10, it was 47 basis points.
Interestingly, their studies all show a large bias that gets smaller as one goes backward over time. I'm skeptical adverse timing is primarily a recent issue because the 2001 internet bubble, as John Cochrane emphasizes, is the poster-child for adverse timing. Perhaps there's a straightforward bias to their metric, because it seems strange that it attenuates for every asset class at the same rate.
Further, as Antti Ilmanen notes in his new book Expected Returns, 'momentum' in strategies is statistically significant, it is there, and suggests a 'Mathew Effect' for allocating capital. I wonder how the adverse timing, which implies average investors are buying more prior to declines than prior to increases, relates the momentum in asset strategy returns.
hat tip: Tadas Viskanta