Chapter 8: Portfolio Managers
Financial Behavior: Players, Services, Products, and Markets. H. Kent Baker, Greg Filbeck, and Victor Ricciardi, editors, 135-152, New York, NY: Oxford University Press, 2017.
Posted: 6 Jun 2017
Date Written: June 1, 2017
In the oversight of most funds, the portfolio manager holds the key decision-making power. Often regarded as foundational to the investment process, a few select managers can attract billions of dollars from investors, giving the managers increased prominence, credibility, and compensation. Despite their stature, portfolio managers are not immune to the behavioral biases that other investors exhibit, which can distort the portfolio management process. This chapter offers an overview of portfolio management and compares characteristics of the fund types that portfolio managers oversee. It also reviews several important behavioral biases that portfolio managers display, as well as the consequences that each has on portfolio construction: overconfidence, herd mentality, risk-taking behavior, and disposition effect. The chapter also contrasts the gender differences of portfolio managers and reviews the ramifications for their respective portfolios.
Keywords: behavioral finance, behavioural finance, portfolio managers, portfolio management, overconfidence, herd mentality, risk-taking behavior, disposition effect, gender differences
JEL Classification: A12, D81, G00, G30, G10, M00, M10, M41
Suggested Citation: Suggested Citation