Do Alpha Males Deliver Alpha? Testosterone and Hedge Funds

56 Pages Posted: 18 Jan 2018 Last revised: 4 Aug 2018

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

Using facial width-to-height ratio (fWHR) as a proxy for testosterone, we show that high-testosterone hedge fund managers significantly underperform low-testosterone hedge fund managers after adjusting for risk. Moreover, high-testosterone managers are more likely to terminate their funds, disclose violations on their Form ADVs, and exhibit greater operational risk. We trace the underperformance to high-testosterone managers' greater preference for lottery-like stocks and reluctance to sell loser stocks. Our results prevail with an alternative proxy for testosterone and are robust to adjustments for sample selection, marital status, sensation seeking, and manager race. They suggest that investors should eschew masculine hedge fund managers.

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

JEL Classification: G02, G23

Suggested Citation

Lu, Yan and Teo, Melvyn, Do Alpha Males Deliver Alpha? Testosterone 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)

Register to save articles to
your library

Register

Paper statistics

Downloads
3,439
rank
2,610
Abstract Views
28,735
PlumX