The Journal of Finance · 1999 · 1.1K citations · 23 references
BusinessFinanceFinancial ManagementFinancial EconomicsInvestment ManagementPortfolio ManagementCognitive Biases In InvestingInvestment FundsInvestor PsychologyMutual Fund ManagementMutual FundsRisk-return AnalysisBiasesFund Manager SelectionManager Selection BiasMutual Fund Manager BehaviorMutual Fund Performance Evaluation
The study investigates whether mutual fund performance is linked to manager characteristics that may signal ability, knowledge, or effort. The authors analyze performance in relation to manager age, the average composite SAT score of the manager’s undergraduate institution, and MBA attainment. After adjusting for behavioral differences and selection bias, managers from higher‑SAT undergraduate institutions still earn higher risk‑adjusted excess returns, while other characteristic effects largely disappear.
We examine whether mutual fund performance is related to characteristics of fund managers that may indicate ability, knowledge, or effort. In particular, we study the relationship between performance and the manager's age, the average composite SAT score at the manager's undergraduate institution, and whether the manager has an MBA. Although the raw data suggest striking return differences between managers with different characteristics, most of these can be explained by behavioral differences between managers and by selection biases. After adjusting for these, some performance differences remain. In particular, managers who attended higher‐SAT undergraduate institutions have systematically higher risk‐adjusted excess returns.
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