Diversity Investing

55 Pages Posted: 22 Dec 2015 Last revised: 26 Apr 2018

See all articles by Alberto Manconi

Alberto Manconi

Bocconi University - Department of Finance; Centre for Economic Policy Research (CEPR)

Antonino Emanuele Rizzo

Nova School of Business and Economics

Oliver G. Spalt

University of Mannheim - Business School; European Corporate Governance Institute (ECGI)

Date Written: August 16, 2017


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

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

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

Antonino Emanuele Rizzo

Nova School of Business and Economics ( email )

Campus de Carcavelos
Rua da Holanda, 1
Carcavelos, 2775-405

Oliver G. Spalt (Contact Author)

University of Mannheim - Business School ( email )

L5, 5
Mannheim, 68131

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

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