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What a difference a (birth) month makes: The relative age effect and fund manager performance

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  • Bai, John (Jianqiu)
  • Ma, Linlin
  • Mullally, Kevin A.
  • Solomon, David H.
Abstract
Many US states have a single cutoff date for school entry, meaning that some children are older than others when they begin kindergarten. We show that this variation in birth months is associated with differences in adult labor market outcomes in the mutual fund industry. Relatively older managers (i.e., those born just after the cutoff) make better stock selections, and their funds outperform their younger peers’ funds by 0.48% per annum. This difference is linked to increased confidence. Survey respondents judge relatively older managers as appearing more confident in photographs, and these managers display more confident behavior: making larger bets, window dressing their holdings less, and securing more fund flows conditional on performance.

Suggested Citation

  • Bai, John (Jianqiu) & Ma, Linlin & Mullally, Kevin A. & Solomon, David H., 2019. "What a difference a (birth) month makes: The relative age effect and fund manager performance," Journal of Financial Economics, Elsevier, vol. 132(1), pages 200-221.
    • Handle: RePEc:eee:jfinec:v:132:y:2019:i:1:p:200-221
    DOI: 10.1016/j.jfineco.2018.10.003
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    More about this item

    Keywords

    Relative age effect; Mutual funds; Fund performance; Confidence;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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