Loss Averse Preferences, Performance, and Career Success of Institutional Investors
نویسندگان
چکیده
Using survey-based measures of loss aversion of mutual fund managers, we study the effects of institutional investor preferences on their investment decisions, performance, and career outcomes. Funds managed by managers with higher aversion to losses take on less downside risk and have lower risk-adjusted returns. More loss averse managers are more likely to have their contracts terminated. Our results indicate that fund management companies may improve quality of hiring decisions by screening prospective managers on the degree of their loss aversion to ensure better match between managerial characteristics and fund’s objectives. JEL Classification:
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