Do Alpha Males Deliver Alpha? Testosterone and Hedge Funds
56 Pages Posted: 18 Jan 2018 Last revised: 14 Dec 2018
Date Written: January 12, 2018
Using facial width-to-height ratio (fWHR) as a proxy for testosterone in males, 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' preference for lottery-like stocks and reluctance to sell loser stocks. Our results prevail with alternative proxies 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, disposition effect, operational risk
JEL Classification: G02, G23
Suggested Citation: Suggested Citation