What a Difference a (Birth) Month Makes: The Relative Age Effect and Fund Manager Performance

50 Pages Posted: 21 Nov 2017 Last revised: 14 Jan 2018

See all articles by John (Jianqiu) Bai

John (Jianqiu) Bai

Northeastern University - D'Amore-McKim School of Business

Linlin Ma

Northeastern University

Kevin Mullally

University of Alabama

David H. Solomon

Boston College - Carroll School of Management

Date Written: November 17, 2017

Abstract

Many US states have a single cutoff date for school entry, meaning that some children are older than others when they begin kindergarten. We document that this variation in birth months is associated with differences in adult labor market outcomes in the mutual fund industry. Relatively older managers (i.e. those born just after the cutoff) make better stock selections and their funds outperform their younger peers’ funds by 0.48% per annum. This difference is linked to increased confidence. Survey respondents judge relatively older managers as appearing more confident in photographs, and these managers display more confident behavior: making larger bets, window-dressing their holdings less, and securing more fund flows conditional on performance.

Keywords: Relative Age Effect, Mutual Funds, Fund Performance, Confidence

JEL Classification: G11, G23, G40, G41

Suggested Citation

Bai, John (Jianqiu) and Ma, Linlin and Mullally, Kevin and Solomon, David H., What a Difference a (Birth) Month Makes: The Relative Age Effect and Fund Manager Performance (November 17, 2017). Journal of Financial Economics (JFE), Forthcoming; Northeastern U. D’Amore-McKim School of Business Research Paper No. 3073148. Available at SSRN: https://ssrn.com/abstract=3073148 or http://dx.doi.org/10.2139/ssrn.3073148

John (Jianqiu) Bai (Contact Author)

Northeastern University - D'Amore-McKim School of Business ( email )

Boston, MA 02115
United States

Linlin Ma

Northeastern University ( email )

Boston, MA 02115
United States
617-373-4569 (Phone)

Kevin Mullally

University of Alabama ( email )

235 Alston Hall
Box 870224
Tuscaloosa, AL 35487
United States
205-348-7858 (Phone)

David H. Solomon

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

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