Hedge-Fund Managers With Flashy Sports Cars Make Worse Investors
Recently read this interesting article which claims hedge-fund managers with flashy sports cars make for worse investors. The article cites an experiment done a group of researchers from NYU, University of Central Florida, the University of Florida, and Singapore Management University which surveyed 1,144 hedge fund managers, their returns and the cars that they drove.
From their survey, the researchers found that:
Advisors who drive flashy sports cars, since they're likely to be risk-prone, unscrupulous, or both. Conversely, those with a practical, low-thrills car are said to perform better.
Hedge fund managers with sports cars, researchers concluded, took on more investment risk because they have a psychological trait called "sensation seeking" in which they are willing to take on riskier tasks.
Personally, I think this article is bogus. Correlation does not imply causation, just because hedge fund managers with sports cars are more likely to have more volatile portfolio returns does not mean the car they drive is indicative of their risk appetite, it could simply just have to do with car preference.
I am wondering what you guys think of this article and whether or not you think that this is true.