Loss Averse Managers Six Times More Likely To Get Fired

Author: ValueWalk

Andriy Bodnaruk

Loss averse fund managers are far more likely to get fired than their more aggressive colleagues according to a recent study which found that 36% of the most risk averse managers were ‘involuntarily terminated’ over an eight-year period compared to just under 6% for the least loss averse. But that’s not necessarily bad news for those funds’ clients.

“Funds managed by managers with higher aversion to losses take on less downside risk and have lower risk-adjusted returns. More loss averse managers are more likely to have their contracts terminated,” University of Notre Dame assistant professor Andriy Bodnaruk and Michigan State University assistant professor Andrei Simonov in their paper Loss Averse Preferences, Performance, and Career Success of Institutional Investors.

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