Does religion affect mutual funds? According to a University of Georgia and Southern Methodist University study, it certainly can.

Mutual fund shops headquartered in mostly Catholic areas take more risk than shops located in Protestant areas, according to study author Tao Shu, an assistant professor of banking and finance at UGA.

Shu gives one interesting inference at why this might be: differing opinions between the two denominations on gambling.

While Protestants tend to be against playing the ponies, the Catholic church sometimes uses lotteries to raise funds for their congregations.

For more information, read the whole press release below.

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Company Press Release



Athens, Ga. – New research from the University of Georgia and Southern Methodist University and published in Management Science shows that the dominant local religion—whether Protestant or Catholic—significantly affects mutual fund behaviors.

             Specifically, the findings show that mutual funds headquartered in heavily Catholic areas tend to take more risks and funds in heavily Protestant areas take less risks, said lead author Tao Shu, assistant professor of banking and finance in the UGA Terry College of Business. The paper was co-authored with Eric Yeung of the Terry College and Johan Sulaeman of Southern Methodist University.

             “Finding evidence that a local culture’s religious beliefs affect mutual funds’ risk-taking decisions is surprising because this a very competitive industry,” Shu said.  “One would expect that profit chasing would eliminate all the impact of culture or anything else. But, surprisingly, a local culture’s religious beliefs still impact risk-taking decisions.”

             Because mutual funds make up about half of all institutional investments in the U.S., the findings have widespread implications for how investors manage their money, he added.

             According to Shu, it has been widely documented by surveys that while Catholics are more tolerant to speculative risk than the general population, Protestants are less tolerant to speculative risk than the general population.

             “One suggestion is that many Protestant congregations are against gambling, but Catholic churches are more tolerant of it—they may even use lotteries to generate funding for the church,” Shu said.

             Local religious beliefs can affect mutual fund behaviors in several ways. For example, local religious beliefs can affect a fund manager’s personal beliefs and in turn mutual fund behaviors, Shu said.  

“Additionally, people tend to choose a place to work where the local culture is consistent with their personal beliefs. So it’s possible that Protestant and Catholic fund managers self-select,” he said. “Also, people like to invest in local stocks, so it’s possible they will invest in local mutual funds. In this case, for example, local Catholic investors may prefer a higher-risk strategy and pressure managers into making those kinds of decisions.”

Yet, despite the risk-preference differences, the end results are about the same. The risk-taking associated with local religious beliefs does not lead to superior fund returns. The lesson for investors, then, is to ask riskier fund managers to play it safe.

“When there is risky behavior and no extra reward, it means there is too much risk,” Shu said.  

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