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Career Concerns of Mutual Fund Managers

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  • Judith Chevalier
  • Glenn Ellison

Abstract

We examine the labor market for mutual fund managers. Using data from 1992–1994, we find that "termination" is more performance-sensitive for younger managers. We identify possible implicit incentives created by the termination-performance relationship. The shape of the termination-performance relationship may give younger managers an incentive to avoid unsystematic risk. Direct effects of portfolio composition may also give younger managers an incentive to "herd" into popular sectors. Consistent with these incentives, we find that younger managers hold less unsystematic risk and have more conventional portfolios. Promotion incentives and market responses to managerial turnover are also studied.

Suggested Citation

  • Judith Chevalier & Glenn Ellison, 1999. "Career Concerns of Mutual Fund Managers," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(2), pages 389-432.
    • Handle: RePEc:oup:qjecon:v:114:y:1999:i:2:p:389-432.
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    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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