What a Difference a (Birth) Month Makes: The Relative Age Effect and Fund Manager Performance
50 Pages Posted: 21 Nov 2017 Last revised: 26 Jul 2019
Date Written: November 17, 2017
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