Publication Type
Journal Article
Version
publishedVersion
Publication Date
2-2024
Abstract
Hedge fund teams with heterogeneous educational backgrounds, academic specializations, work experiences, genders, and races, outperform homogeneous teams after adjusting for risk and fund characteristics. An event study of manager team transitions, instrumental variable regressions, and an analysis of managers who simultaneously operate solo- and team-managed funds address endogeneity concerns. Diverse teams deliver superior returns by arbitraging more stock anomalies, avoiding behavioral biases, and minimizing downside risks. Moreover, diversity allows hedge funds to circumvent capacity constraints and generate persistent performance. Our results suggest that diversity adds value in asset management. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online
Keywords
Capacity constraints, gender diversity, performance, risk patterns, returns, persistence, managers, heteroskedasticity, friendship
Discipline
Finance and Financial Management | Portfolio and Security Analysis
Research Areas
Finance
Publication
Review of Financial Studies
Volume
37
Issue
2
First Page
639
Last Page
683
ISSN
0893-9454
Identifier
10.1093/rfs/hhad064
Publisher
Oxford University Press
Citation
LU, Yan; NAIK, Narayan Y.; and TEO, Melvyn.
Diverse hedge funds. (2024). Review of Financial Studies. 37, (2), 639-683.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/7267
Copyright Owner and License
Authors-CC-BY
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.
Additional URL
https://doi.org/10.1093/rfs/hhad064