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

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: 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