The Confucian Cultural Impact on Hedge Fund Performance : Evidence from China

We examine how Confucian culture, a cornerstone of traditional Chinese culture that profoundly influences Asian countries, affects hedge funds. Using a sample of 9,120 Chinese hedge funds that cover the period from April 2010 to December 2022, we find that hedge funds with a stronger Confucian cultural impact take on less investment risk and deliver higher returns and alphas, resulting in elevated Sharpe ratios. It is more pronounced at funds located in regions with lower levels of marketization and restricted openness, where formal institutions are lacking. Furthermore, active management scenarios amplify this impact