Fast-driving fund managers take more risk
Sensation seeking is a personality trait defined by the search for experiences and feelings that are varied, novel, complex and intense; and by the readiness to take physical, social, legal, and financial risks for the sake of such experiences. Research has shown that CEOs with this personality trait take on more business risk, and sensation seeking retail investors exhibit riskier economic behaviour and trade more often. Yet, little is known about sensation seeking on the trading behavior of professional investors.
Professor Melvyn Teo, who is the Lee Kong Chian Professor of Finance and Deputy Dean for Faculty & Research at the SMU Lee Kong Chian School of Business, specialises in hedge funds research. In this podcast, he shares his study which employed data on the automobile ownership of hedge fund managers to gauge their proclivity for sensation seeking, and analysed their investment behaviour.