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Full-Text Articles in Business
Sensation Seeking And Hedge Funds, Stephen Brown, Yan Lu, Sugata Ray, Song Wee Melvyn Teo
Sensation Seeking And Hedge Funds, Stephen Brown, Yan Lu, Sugata Ray, Song Wee Melvyn Teo
Research Collection Lee Kong Chian School Of Business
We show that motivated by sensation seeking, hedge fund managers who own powerful sports cars take on more investment risk but do not deliver higher returns, resulting in lower Sharpe ratios, information ratios, and alphas. Moreover, sensation-seeking managers trade more frequently, actively, and unconventionally, and prefer lottery-like stocks. We show further that some investors are themselves susceptible to sensation seeking and that sensation-seeking investors fuel the demand for sensation-seeking managers. While investors perceive sensation seekers to be less competent, they do not fully appreciate the superior investment skills of sensation-avoiding fund managers.
Public Hedge Funds, Lin Sun, Melvyn Teo
Public Hedge Funds, Lin Sun, Melvyn Teo
Research Collection Lee Kong Chian School Of Business
Hedge funds managed by listed firms significantly under-perform funds managed by unlisted firms. The under-performance is more severe for funds with low manager deltas, poor governance, and no manager co-investment, or managed by firms whose prices are sensitive to earnings news. Notwithstanding the under-performance, listed asset management firms raise more capital, by growing existing funds and launching new funds post listing, and harvest greater fee revenues than do comparable unlisted firms. The results are consistent with the view that, for asset management firms, going public weakens the alignment between ownership, control, and investment capital, thereby engendering conflicts of interest.
Do Alpha Males Deliver Alpha? Facial Structure And Hedge Funds, Yan Lu, Melvyn Teo
Do Alpha Males Deliver Alpha? Facial Structure And Hedge Funds, Yan Lu, Melvyn Teo
Research Collection Lee Kong Chian School Of Business
Facial structure as encapsulated by facial width-to-height ratio (fWHR) maps onto masculine behaviors in males and may positively relate to testosterone. We find that high-fWHR hedge fund managers underperform low-fWHR hedge fund managers by 5.83% per year after adjusting for risk. Moreover, funds operated by high-fWHR managers exhibit higher operational risk, suffer from a greater asset-liability mismatch, and are more likely to fail. We trace the underperformance to high-fWHR managers’ preference for lottery-like stocks and reluctance to sell loser stocks. The results are robust to adjustments for sample selection, marital status, sensation seeking, and manager race, and suggest that investors …