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