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File name: SSRN-id2060955. ; Size: 537K
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No Place Like Home: Familiarity in Mutual Fund Manager Portfolio Choice
Veronika Krepely Pool
Indiana University Bloomington - Department of Finance
Noah Stoffman
Indiana University Bloomington - Department of Finance
Scott E. Yonker
Indiana University Bloomington - Department of Finance
April 22, 2012
Abstract:
We show that familiarity affects the portfolio decisions of mutual fund managers. Controlling for fund location, funds overweight stocks from their managers' home states by 12% compared to their peers. In team-managed funds, home-state overweighting is 37% larger than the fund location effect. The home-state bias is stronger if the manager is inexperienced, is resource-constrained, or spent more time in his home state. Home-state stocks do not outperform other holdings, confrming that home-state investments are not informed. The overweighting also leads to excessively risky portfolios.
Number of Pages in PDF File: 50
Keywords: Mutual Funds, familiarity bias, behavioral finance
JEL Classification: G11, G29
working papers series
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Date posted: May 24, 2011
; Last revised: May 16, 2012
Suggested CitationPool, Veronika Krepely, Stoffman, Noah and Yonker, Scott E., No Place Like Home: Familiarity in Mutual Fund Manager Portfolio Choice (April 22, 2012). Available at SSRN: http://ssrn.com/abstract=1844464 or http://dx.doi.org/10.2139/ssrn.1844464
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