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The People in Your Neighborhood: Social Interactions and Mutual Fund PortfoliosVeronika Krepely PoolIndiana University Bloomington - Department of Finance Noah StoffmanIndiana University Bloomington - Department of Finance Scott E. YonkerIndiana University Bloomington - Department of Finance April 18, 2013 Abstract: We fi nd that socially connected fund managers have more similar holdings and trades. The portfolio overlap of funds whose managers reside in the same neighborhood is considerably higher than that of funds whose managers live in the same city but in diff erent neighborhoods. These e ffects are larger when managers are neighbors longer or are of a similar ethnic background, and are not explained by preferences. Valuable information is transmitted through these peer networks: a long-short strategy composed of stocks purchased minus sold by neighboring managers delivers positive risk-adjusted returns. Unlike prior empirical work, our tests disentangle the e ffects of social interactions from community eff ects.
Number of Pages in PDF File: 59 working papers seriesDate posted: June 27, 2012 ; Last revised: April 22, 2013Suggested CitationContact Information
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