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Diverse Hedge Funds

Author

Listed:
  • Yan Lu
  • Narayan Y Naik
  • Melvyn Teo

Abstract

Hedge fund teams with heterogeneous educational backgrounds, academic specializations, work experiences, genders, and races, outperform homogeneous teams after adjusting for risk and fund characteristics. An event study of manager team transitions, instrumental variable regressions, and an analysis of managers who simultaneously operate solo- and team-managed funds address endogeneity concerns. Diverse teams deliver superior returns by arbitraging more stock anomalies, avoiding behavioral biases, and minimizing downside risks. Moreover, diversity allows hedge funds to circumvent capacity constraints and generate persistent performance. Our results suggest that diversity adds value in asset management.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online

Suggested Citation

  • Yan Lu & Narayan Y Naik & Melvyn Teo, 2024. "Diverse Hedge Funds," The Review of Financial Studies, Society for Financial Studies, vol. 37(2), pages 639-683.
    • Handle: RePEc:oup:rfinst:v:37:y:2024:i:2:p:639-683.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhad064
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    More about this item

    Keywords

    G20; G23; J15; J16; J24; M14;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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