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Diversity Investing

55 Pages Posted: 22 Dec 2015 Last revised: 17 Aug 2017

Alberto Manconi

Bocconi University - Department of Finance

Antonino Emanuele Rizzo

Tilburg University

Oliver G. Spalt

Tilburg University - Department of Finance

Date Written: August 16, 2017

Abstract

Top management team diversity matters for stock returns. We develop a new text–based measure of team diversity and apply it to a sample of over 40,000 top executives in U.S. firms from 2001 to 2014. Buying firms with diverse teams and selling firms with homogenous teams — a strategy we call “diversity investing” — outperforms leading asset pricing anomalies over our sample period on a value-weighted basis. We examine a range of possible explanations and find strong evidence for the view that analysts and investors have downward-biased return expectations on firms with diverse teams, consistent with a mispricing explanation for diversity returns.

Keywords: Behavioral Finance, Top Management Teams, Anomalies, Diversity

Suggested Citation

Manconi, Alberto and Rizzo, Antonino Emanuele and Spalt, Oliver G., Diversity Investing (August 16, 2017). Available at SSRN: https://ssrn.com/abstract=2706550 or http://dx.doi.org/10.2139/ssrn.2706550

Alberto Manconi

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

HOME PAGE: http://mypage.unibocconi.eu/albertomanconi/

Antonino Emanuele Rizzo

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC 5000 LE
Netherlands

Oliver G. Spalt (Contact Author)

Tilburg University - Department of Finance ( email )

Department of Finance
Tilburg University
Tilburg, 5000 LE
Netherlands
+31 13 466 3545 (Phone)

HOME PAGE: http://www.oliverspalt.com

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