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Next time, ask your fund manager what kind of car they drive

Next time, ask your fund manager what kind of car they drive

13-12-2017 | From the field
Tell me what car you drive and I will tell you who you are. This paper 1 states that hedge fund managers who own powerful sports cars are willing to take on more investment risk, and that, conversely, managers who own practical but unexciting cars are less willing to take on investment risk. It also finds that the incremental risk assumed by sports car buyers is not associated with higher returns.
  • David Blitz
    David
    Blitz
    PhD, Executive Director, Head of Quant Selection Research

Consequently, these managers deliver lower Sharpe ratios than their peers. In addition, sports car owners were found to be more likely to terminate their funds and engage in fraudulent behavior. The authors consider several alternative explanations and conclude that the revealed preference of managers in the automobile market provides evidence of the personality trait of sensation seeking, which in turn drives their behavior in the investment arena.

Our clients do not need to be worried about these findings, as Volvo and Volkswagen are the most popular car brands among Robeco’s quant fund managers and analysts.

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1Brown, Lu, Ray & Teo, “ Sensation Seeking, Sports Cars, and Hedge Funds”, SSRN working paper no. 2882983
From the field
From the field

Our researchers publish many whitepapers based on their own empirical studies; they also follow quantitative research done by others.

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