Inferring Latent Social Networks from Stock Holdings
58 Pages Posted: 22 Jul 2015 Last revised: 13 Sep 2017
Date Written: September 11, 2017
We infer the latent social networks of investors using data on their stock holdings. We map linkages to portfolio weights using a portfolio-choice model. The precision of an investor's private signal about firm value is assumed to increase with his connections in the city where the firm is headquartered. Using money-manager data, we find that managerial linkages to a city are overly dispersed relative to the Erdös-Rényi model of i.i.d. connections. Managers at the tail of this distribution with non-i.i.d. linkages have more university alumni in that city. Their stock holdings there outperform their holdings in other cities.
Keywords: Social Networks, Poisson Regressions, Investor Behavior
JEL Classification: G1, G2, G3
Suggested Citation: Suggested Citation