62 Pages Posted: 27 Jun 2012 Last revised: 13 May 2014
Date Written: December 5, 2013
We find 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 different neighborhoods. These effects 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 effects of social interactions from community effects.
Keywords: Mutual funds, social networks, word-of-mouth
Suggested Citation: Suggested Citation
Pool, Veronika Krepely and Stoffman, Noah and Yonker, Scott E., The People in Your Neighborhood: Social Interactions and Mutual Fund Portfolios (December 5, 2013). Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2093159 or http://dx.doi.org/10.2139/ssrn.2093159
By Ning Zhu