49 Pages Posted: 18 Feb 2015 Last revised: 20 Mar 2016
Date Written: March 14, 2016
We explore the impact of limited attention by analyzing the performance of hedge fund managers who are distracted by marital events. We find that marriages and divorces are associated with significantly lower fund alpha, during the six–month period surrounding and the two-year period after the event. Busy managers who manage multiple funds and who are not part of a team are more affected by marital transitions. Inattentive managers place fewer active bets relative to their style peers, load more on index stocks, exhibit higher R–squareds with respect to systematic factors, and are more prone to the disposition effect.
Keywords: Hedge Funds, Limited Attention, Behavioral Finance, Disposition Effect, Marriage, Divorce
JEL Classification: G12; G23; G14
Suggested Citation: Suggested Citation
Lu, Yan and Ray, Sugata and Teo, Melvyn, Limited Attention, Marital Events, and Hedge Funds (March 14, 2016). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2565749 or http://dx.doi.org/10.2139/ssrn.2565749
By Nathan Swem