Do Alpha Males Deliver Alpha? Facial Structure and Hedge Funds

61 Pages Posted: 18 Jan 2018 Last revised: 12 Feb 2019

See all articles by Yan Lu

Yan Lu

University of Central Florida - College of Business Administration

Melvyn Teo

Singapore Management University - Lee Kong Chian School of Business

Date Written: January 12, 2018

Abstract

Facial structure as encapsulated by facial width-to-height ratio (fWHR) maps onto masculine behaviors in males and may positively relate to testosterone. We find that high-fWHR hedge fund managers underperform low-fWHR hedge fund managers by 5.83% per year after adjusting for risk. Moreover, funds operated by high-fWHR managers exhibit higher operational risk, suffer from a greater asset-liability mismatch, and are more likely to fail. We trace the underperformance to high-fWHR managers' preference for lottery-like stocks and reluctance to sell loser stocks. The results are robust to adjustments for sample selection, marital status, sensation seeking, and manager race, and suggest that investors should eschew masculine managers.

Keywords: hedge funds, alpha, testosterone, facial width-to-height, disposition effect, operational risk

JEL Classification: G02, G23

Suggested Citation

Lu, Yan and Teo, Melvyn, Do Alpha Males Deliver Alpha? Facial Structure and Hedge Funds (January 12, 2018). Available at SSRN: https://ssrn.com/abstract=3100645 or http://dx.doi.org/10.2139/ssrn.3100645

Yan Lu

University of Central Florida - College of Business Administration ( email )

PO Box 161400
Orlando, FL 32816
United States

Melvyn Teo (Contact Author)

Singapore Management University - Lee Kong Chian School of Business ( email )

50 Stamford Road
Singapore, 178899
Singapore
+65 6828 0735 (Phone)
+65 6822 0777 (Fax)

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