Why Women-Led Hedge Funds Love Risk

New Research Reveals 'Safe Haven' Effect

Oct 09, 2018
Logistics

SMITH BRAIN TRUST – It’s long been believed that if you want to rein in risk-taking at an organization, employing women as top managers can help with that. But new research from Maryland Smith’s Cristian Dezsö suggests that it can have the opposite result. 

That’s because of what Dezsö and his co-authors refer to as a “safe haven” effect. They found that the presence of female managers actually encourages colleagues in the same family of funds “to express their investing individuality by taking on more risk.”

In their research, Dezsö and co-authors Evan Rawley of the University of Minnesota and David Gaddis Ross of the University of Florida parsed two decades of data on more than 20,000 mutual fund managers.

“Male and, especially, female fund managers take on significantly more idiosyncratic risk — a measure of a fund manager’s unique investment style — and their funds exhibit a higher market beta — a measure of the non-diversifiable risk to which a fund’s investors are subject — when they have a higher proportion of female fund manager colleagues,” says Dezsö, an associate professor of logistics, business and public policy with the University of Maryland’s Robert H. Smith School of Business.

The findings, contained in a working paper, adds an interesting caveat to existing literature, which finds that female leaders are linked to lower risk-taking in acquisitions, financial leverage, capital expenditures and stock volatility.

Read more: The Gender Composition of Firms and Risk-Taking Behavior: Evidence from Mutual Funds

GET SMITH BRAIN TRUST DELIVERED
TO YOUR INBOX EVERY WEEK

SUBSCRIBE NOW

Tags: 

About the Expert(s)

Cristian Dezsö

Cristian Dezső is an Associate Professor in the Logistics, Business and Public Policy department at the University of Maryland's Smith School of Business. He holds a Ph.D. in Economics and International Business from New York University's Stern School of Business, an M.A. in economics from the Central European University in Budapest, Hungary, and a B.A. in business from the "Babeș-Bolyai" University in Cluj, Romania. Prior to joining the Smith School, he was an associate with the economic consulting firm Cornerstone Research in Washington DC.

More In

Logistics

How Risk and Gender Affect Fund Manager Performance

Maryland Smith’s Cristian Dezsö says his recent finding of strong performance by R&D-heavy companies managed by women confirms theories that “women have a management style that encourages people to speak up and exchange ideas” and factors in women outperforming men as fund managers.

Oct 28, 2020
What’s in Store for the U.S. Postal Service?

Between the pandemic and the hurricane season, 2020 has proved to be a challenging year for the U.S. Postal Service. What's next?

Sep 03, 2020
How COVID-19 Is Changing the Airline Industry

Here are some of the big trends facing the airline industry and its passengers now.

Jun 18, 2020
Robert H. Smith School of Business
Map of Robert H. Smith School of Business
University of Maryland
Robert H. Smith School of Business
Van Munching Hall
College Park MD 20742