Cognitive skills and economic preferences in the fund industry

Arbeitspapier

By running a battery of incentivized and non-incentivized experiments with fund managers from four countries in the European Union, we investigate the impact of fund managers' cognitive skills and economic preferences on the dynamics of the mutual funds they manage. First, we find that fund managers' risk tolerance positively correlates with fund risk when accounting for fund benchmark, fund category, and other controls. Second, we show that fund managers' ambiguity tolerance positively correlates with the funds' tracking error from the benchmark. Finally, we report that cognitive skills do not explain fund performance in terms of excess returns. However, we do find that fund managers with high cognitive reflection abilities generate these returns at lower risk.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Papers in Economics and Statistics ; No. 2019-16

Classification and Topics

• Classification: Wirtschaft ; Design of Experiments: Laboratory, Individual ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡ ; Portfolio Choice; Investment Decisions ; Behavioral Finance: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets‡ ; Human Capital; Skills; Occupational Choice; Labor Productivity
• Subject: Cognitive skills ; economic preferences ; fund managers ; fund performance ; experimental finance

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Farago, Adam ; Holmen, Martin ; Holzmeister, Felix ; Kirchler, Michael ; Razen, Michael
• Event: Veröffentlichung
• (who): University of Innsbruck, Research Platform Empirical and Experimental Economics (eeecon)
• (where): Innsbruck
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/207082
• Last update: 10.03.2025, 11:44 AM CET