Scientific study suggests CFA has benefits over the MBA

It's the kind of thing that every CFA student who's spent a few thousand on their qualification loves to hear, and that every MBA student who's spent many tens of thousands on their qualification would rather ignore. Fortunately, it applies only to portfolio managers.

Conducted by various US academics, and accessible here, a new study suggests that when it comes to portfolio performance there's no discernible difference between someone with a CFA and someone with an MBA.

Interestingly, the study also suggests that portfolio managers with MBAs tend to be more risk- taking than their CFA-endowed peers. If CFAs are able to achieve similar results whilst being slow and steady, the implication therefore appears to be that they are better.

The study's authors offer the following theory as to why this is -

... business schools are teaching MBA's to create risk. The reason for this is not immediately obvious, but a compelling possibility is that managers, knowing the distribution of year end bonuses is asymmetrical, intentionally increase tracking error to improve the odds of a big bonus. With the high standard CFA's attribute to ethical behaviour, perhaps they are less likely to take that path..

It's also very possible that MBAs want to earn a big bonus in order to pay back those expensive fees, so maybe banks/portfolio managers should increase sign-ons if they don't want them taking excessive risks.

Or it could simply be that MBAs who go into financial services are mostly men and that men are more at home with being edgy. The Wall Street Journal cites a study which found that 36% of female MBAs choose high-risk financial careers such as investment banking or trading, compared with 57% of the men.