Do Alpha Males Deliver Alpha? Facial Structure and Hedge Funds
61 Pages Posted: 18 Jan 2018 Last revised: 12 Feb 2019
Date Written: January 12, 2018
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: Suggested Citation