Specifically, Zhu was describing the herd behavior that tends to push up the valuation of the underlying assets in the ETFs. However, the high valuation will eventually revert back to mean, so the asset would underperform.

Zhu, though, pointed out that the pattern did not hold as well in other asset classes, notably fixed-income.

“Fixed-income investors are more risk averse. They want to protect their principal or protect their investment. So instead of return-chasing, when things are not going well they may overreact [and sell],” Zhu added.

For more information on ETFs, visit our ETF 101 category.