Why Older Kindergartners Should Run Your Mutual Fund (Someday)

Using a sample of 4,081 managers between 1980 and 2015, researchers found that those who were among the oldest quarter of their kindergarten class outperformed those in the youngest quarter by an average of 0.48 percentage point a year. For an investor with $1 million in a mutual fund, that difference would amount to $4,800 for one year.

Confidence factor

No doubt, this may sound a bit odd, or even silly. But there’s a reason fund managers who were older in kindergarten have tended to generate better returns. It’s because they are more confident, says

Kevin Mullally,

a co-author of the paper and a professor of economics at the University of Alabama’s Culverhouse College of Commerce in Tuscaloosa. His fellow authors are

John Bai

and

Linlin Ma

of Northeastern University’s D’Amore-McKim School of Business, and

David H. Solomon

of Boston College’s Carroll School of Management. Their paper will be published in the Journal of Financial Economics.

The confidence of managers who started kindergarten later, Dr. Mullally says, shows up in better, bolder decisions; they tend to hold fewer stocks while investing more in each of them, for instance. They also are less likely to “window-dress” their holdings, he says, meaning they’re more open about having held losing stocks at some point.

Such self-confidence is a result, Dr. Mullally says, of the “relative-age effect,” which posits that children who are older than their peers in kindergarten are more likely to perform better in school and have higher self-esteem.

Praise for study

Samuel Hartzmark,

an associate professor of finance at the University of Chicago’s Booth School of Business, says the study stands out in part for the clever way it establishes that managers who were older in kindergarten even look more confident. In a random online survey, Dr. Mullally and his co-authors asked people to evaluate pairs of photos showing as adults a manager who was older in kindergarten and one who was younger. In 55% of the cases, respondents picked the manager who started kindergarten at a later age as the more confident-looking one.

The survey, Dr. Hartzmark says, is a valuable “contribution to the larger behavioral-economics literature about how people view the world.”

“It’s one of the better papers on this topic I’ve seen in a while,” says

Elizabeth Dhuey,

associate professor of economics at the University of Toronto, who has studied the relative-age effect in detail.

Still, Dr. Dhuey says, while the paper controls for some aspects of education, such as SAT scores and M.B.A.s, it doesn’t completely rule out the possibility that more-successful fund managers may just be better educated.

Dr. Mullally acknowledges the limitations of the study, but says he feels it is unclear how being better educated would manifest itself except through the controls used in the study. “I doubt managers are learning how to better invest while in elementary school,” he says.

Looking ahead, Dr. Mullally says he would like to see further research on, among other things, how early life experiences have the potential to shape our lives indelibly. “It’s quite fascinating to think,” he says, “that the things we experience when we’re young have such a large impact on us 30 years down the line.”

Mr. Kassel is a writer in New York. He can be reached at reports@wsj.com.