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Vanity in teams

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  • Dorn, Daniel
  • Yadav, Pramod Kumar

Abstract

We hypothesize that vanity amplifies realization utility in teams; admitting mistakes is particularly painful when mistakes have to be admitted to self and colleagues. Consistent with the Vanity hypothesis, U.S. stock funds run by teams hold on to losers when losers were initiated by a subset of the team (to avoid admitting a mistake to their non-initiating colleagues), when initiators of loser positions are more experienced (to avoid losing authority by admitting mistakes to junior colleagues), and when all colleagues agree that a position is a loser. Vanity is costly – losers held underperform by a risk-adjusted 1% annually.

Suggested Citation

  • Dorn, Daniel & Yadav, Pramod Kumar, 2026. "Vanity in teams," Journal of Banking & Finance, Elsevier, vol. 184(C).
    • Handle: RePEc:eee:jbfina:v:184:y:2026:i:c:s0378426626000117
    DOI: 10.1016/j.jbankfin.2026.107637
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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