Do you know where your mutual fund manager went to college?

As it turns out, it may make a difference. But not for the reasons you would initially think.

Research out of the University of Georgia and Southern Methodist University traces the connection between religion and risk taking in mutual funds.

Authors Tao Shu, Eric Yeung, and Johan Sulaeman mapped out mutual funds based on where they are headquartered.

They then compared that information with county-level data about religious distributions.

What they found is surprising. As it turns out, funds headquartered in counties with large Catholic populations have more volatile returns than funds in counties with large Protestant populations.

To verify their results, the researchers also looked at where fund managers went to college, and they found that the pattern still held true: The more heavily Catholic the county in which the school is located, the more volatile the fund. By comparison, mangers who went to college in counties with large Protestant populations tended to run less volatile funds.

The researchers, whose work was published in Management Science, say their findings demonstrate that Catholic culture tends to be more accepting of investment risk than Protestant culture. They also see their results as proof that local cultures can influence the behaviors of fund managers.

"Despite the large body of literature on [the] mutual fund industry, the effects of local culture on mutual funds' investment decisions have never been explored," they write. "Local culture can exert a non-negligible impact on mutual fund investments for several reasons. Fund managers and employees are likely to conform to the norms in local culture, as social identity theories...suggest that the value in sharing an identity and having a sense of being in a particular group has substantial influence on people's behaviors."

This culture argument also applies to the locations where managers went to college. "School-location religiosity ratios likely capture the managers' religious beliefs, primarily because a person with certain religious belief is likely to choose a school where the culture is consistent with the religious belief of herself, her family, or her hometown," the authors write. "Additionally, local culture at the school location helps nurture one's beliefs during her school years."

For their study, the authors analyzed 1,621 growth and aggressive-growth equity mutual funds. They studied the funds' returns and holdings between 1988 and 2008. In addition to discovering a broad link between volatility and religion, they also found that religion correlates with funds' concentration, meaning that funds in Catholic counties were more likely to have portfolios with fewer holdings. This strategy increases risk because if even one stock takes a turn for the worse, the fund's investors are going to feel the pain. "We also find that mutual funds' tournament risk-taking behavior—i.e., losers at the midyear take more risk in the second half of the year—only exists for funds in low-Protestant (or high-Catholic) counties," the authors note.

The authors concluded that local culture influences managers on a macro, rather than a micro, level. "[W]e find no differences in [funds'] holdings of individual risky stocks, suggesting that the effects of religiosity ratios on risk-taking are at the portfolio level instead of the individual stock level," they observe.

Risk and volatility, however, do not always translate into reward. Indeed, the authors caution that their results indicate that "the higher return volatilities of funds in counties with [a] lower Protestant population or higher Catholic population are not rewarded by higher returns."

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