Family Descent as a Signal of Managerial Quality: Evidence from Mutual Funds

NBER Working Paper No. 22517

Issued in August 2016

NBER Program(s):Labor Studies



We study the relation between mutual fund managers’ family backgrounds and their professional performance. Using hand-collected data from individual Census records on the wealth and income of managers’ parents, we find that managers from poor families deliver higher alphas than managers from rich families. This result is robust to alternative measures of fund performance, such as benchmark-adjusted return and value extracted from capital markets. We argue that managers born poor face higher entry barriers into asset management, and only the most skilled succeed. Consistent with this view, managers born rich are more likely to be promoted, while those born poor are promoted only if they outperform. Overall, we establish the first link between family descent of investment professionals and their ability to create value.

A non-technical summary of this paper is available in the December 2016 NBER Digest. You can sign up to receive the NBER Digest by email.



Acknowledgments

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Document Object Identifier (DOI): 10.3386/w22517

Published: Oleg Chuprinin & Denis Sosyura, 2018. "Family Descent as a Signal of Managerial Quality: Evidence from Mutual Funds," The Review of Financial Studies, vol 31(10), pages 3756-3820.

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