Gender bias amongst mutual fund managers

Behavioural literature on investor behaviour suggests that over-confident investors are aggressive with higher levels of tracking errors, large active shares and active weights. Overconfident investors also trade far more often and produce lower net returns.

Behavioural literature also suggests that male investors are comparatively more confident than female investors. In the context of delegated portfolio management, fund manager overconfidence results in similar investment behaviour. Prior literature further reports that when a fund is performing poorly compared to its peers, the fund manager behaves even more aggressively. However, there is a scarcity of literature on how female fund managers’ invest, especially if the fund is performing poorly.

This research poses the questions “Do female fund managers generate better risk objective returns, by reducing churn (portfolio turnover) and with lower active weights and active share?". Adjustments for manager qualifications, experience, and other demographic characteristics can explain if the overconfidence amongst males is reflected in their investment techniques or does appropriate governance help in reducing this behaviour.

If this area of research is on interest to you, you may consider undertaking an Honours project on this topic. Contact Dean Wilkie to have a discussion.