Abstract

This paper investigates what affects hedge fund performance and risk-taking in a behavioral finance context. Links between physical characteristics and behavioral traits have been well established. However previous studies have relied on small size samples in
controlled conditions. In this paper, we explore the relationship between facial width-to-height ratio (fWHR), a face structure metric identified by previous research to be associated with a cluster of behavioral traits in men, and investment behaviors in real financial markets using a sample of 178 hedge funds from 1994 to 2016. We find that risk-taking of hedge funds correlates positively with fWHR of their managers, while there is no significant evidence proving the association between fWHR and hedge fund performance. Although
this is a study of association, the results may shed light on biological determinants of hedge fund investment behaviors.