Is a Team Different from the Sum of its Parts? Evidence from Mutual Fund Managers

43 Pages Posted: 5 Mar 2008 Last revised: 30 Mar 2011

See all articles by Michaela Baer

Michaela Baer

University of Cologne, Centre for Financial Research (CFR)

Alexander Kempf

University of Cologne - Department of Finance & Centre for Financial Research (CFR)

Stefan Ruenzi

University of Mannheim - Department of International Finance

Date Written: February 2009

Abstract

This paper provides the first empirical test of the diversification of opinion theory and the group shift theory using real business data. Our data set covers management teams and single managers of US equity mutual funds. Our results reject the group shift theory and support the diversification of opinion theory: extreme opinions of single team managers average out and, consequently, teams take less extreme decisions than individuals do. We find that teams follow less extreme investment styles than single managers and that teams are eventually less likely to achieve extreme performance outcomes. These results hold after taking into account the impact of fund characteristics and team characteristics.

Keywords: Mutual Funds, Team Management, Investment Behaviour

JEL Classification: G23, M54

Suggested Citation

Baer, Michaela and Kempf, Alexander and Ruenzi, Stefan, Is a Team Different from the Sum of its Parts? Evidence from Mutual Fund Managers (February 2009). Available at SSRN: https://ssrn.com/abstract=1089207 or http://dx.doi.org/10.2139/ssrn.1089207

Michaela Baer

University of Cologne, Centre for Financial Research (CFR) ( email )

Cologne, 50923
Germany
+49 (0)221 470 7709 (Phone)
+49 (0)221 470 3992 (Fax)

Alexander Kempf

University of Cologne - Department of Finance & Centre for Financial Research (CFR) ( email )

Cologne, 50923
Germany
+49 221 470 2714 (Phone)
+49 221 470 3992 (Fax)

Stefan Ruenzi (Contact Author)

University of Mannheim - Department of International Finance ( email )

L9, 1-2
Mannheim, 68131
Germany

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