CNN: Study links mutual fund decisions with religion

Predominant religion in a community affects the decision-making process of mutual fund managers in that community

CNN’s “Belief” blog covered the research of SMU financial economist Johan Sulaeman. In the Sept. 25 article “Study links mutual fund decisions with religion,” CNN journalist Laura Koran reported on research by Sulaeman and others who found that religion plays a major role in many Americans’ lives, including their investing.

“Specifically, the study found that mutual funds located in predominantly Catholic areas are associated with increasing fund volatility, a measure of risk taking, by about 6 percent, compared to those in low-Catholic areas. Those in predominately Protestant counties have a 14 percent lower fund volatility compared with those in low-Protestant areas.”

Sulaemann is an assistant professor of finance in the Cox School of Business.

Read the full story.

EXCERPT:

By Laura Koran
CNN

Faith plays a major role in many Americans’ lives, affecting their outlook on morality, politics and even – according to a new study – investing.

The study, conducted at the University of Georgia and Southern Methodist University, found that the predominant religion in a community affects the decision-making process of mutual fund managers in that community, specifically when it comes to risk.

Mutual funds in counties with larger Catholic communities tend to embrace risk more than those in majority-Protestant counties, the study found. Earlier studies have found that Catholics are generally more prone to take speculative risks than the average population, while Protestants are more risk-averse than the average population.

The findings, which will be published next month in the academic journal Management Science, could help provoke a re-evaluation of how investing works, its authors said.

“One would expect that with very, very severe competition within the mutual fund industry, culture should play no role in mutual fund decisions because fund managers … should adopt value-maximizing strategies,” said Tao Shu, an assistant professor of finance at the University of Georgia and one of the study’s authors.

SMU has an uplink facility located on campus for live TV, radio, or online interviews. To speak with Metin Eren or book him in the studio, call SMU News & Communications at 214-768-7650.

“Surprisingly,” Shu continued, “we found that despite the very intense competition within the mutual fund industry, mutual funds are still impacted by local culture.”

Specifically, the study found that mutual funds located in predominantly Catholic areas are associated with increasing fund volatility, a measure of risk taking, by about 6%, compared to those in low-Catholic areas. Those in predominately Protestant counties have a 14% lower fund volatility compared with those in low-Protestant areas.

The study looked at 1,621 growth and aggressive growth mutual funds.

Shu conducted the study with University of Georgia colleague Eric Yeung and Johan Sulaeman of Southern Methodist University.

Read the full story.

SMU is a private university in Dallas where nearly 11,000 students benefit from the national opportunities and international reach of SMU’s seven degree-granting schools. For more information see www.smuresearch.com. Follow SMU Research on Twitter, @smuresearch.

SMU has an uplink facility located on campus for live TV, radio, or online interviews. To speak with an SMU expert or book an SMU guest in the studio, call SMU News & Communications at 214-768-7650.

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