Publication Type
Working Paper
Version
publishedVersion
Publication Date
2-2022
Abstract
We find that minority operated funds deliver higher alphas, Sharpe ratios, and information ratios than do non-minority operated funds. Moreover, minority fund managers attended more selective schools, worked at higher status investment banks, and are more likely to hold post-graduate degrees. Yet, minority managers raise less start-up capital and attract lower investor flows. Racial homophily fuels investors' appetite for non-minority funds. To address endogeneity, we leverage on an event study of minority manager fund transitions and an instrumental variable analysis that exploits racial imprinting during childhood. The results suggest that minorities face significant barriers to entry in the hedge fund industry.
Keywords
Race, Racial bias, Discrimination, Barriers to entry, Minorities, Homophily, Education, Hedge funds
Discipline
Finance and Financial Management | Portfolio and Security Analysis | Race and Ethnicity
First Page
1
Last Page
55
Identifier
10.2139/ssrn.4070484
Citation
LU, Yan; NAIK, Narayan Y.; and TEO, Melvyn.
Race and hedge funds. (2022). 1-55.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/6999
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.2139/ssrn.4070484
Included in
Finance and Financial Management Commons, Portfolio and Security Analysis Commons, Race and Ethnicity Commons