Is it Who You Know or What You Know? Evidence from IPO Allocations and Mutual Fund Performance

49 Pages Posted: 20 Jan 2016 Last revised: 1 Feb 2016

See all articles by Chuan-Yang Hwang

Chuan-Yang Hwang

Nanyang Technological University (NTU)

Sheridan Titman

University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)

Yuxi Wang

Shanghai Jiao Tong University - Antai College of Economics and Management

Date Written: December 1, 2015

Abstract

Consistent with Chevalier and Ellison (1999), we find that mutual fund managers with degrees from elite universities tend to outperform their counterparts from less elite universities. The abnormal performance can be characterized as “fast performance,” the stocks they select realize excess returns only in the quarter the stocks are purchased, and this fast performance is largely due to the elite graduates having better access to IPO underwriters. A strategy of buying mutual funds in months when they are connected to underwriters scheduled to issue IPOs generates significant excess returns. The mutual funds generate insignificant excess returns in months with no IPO connections.

Keywords: Social connection, IPO allocation, mutual fund performance, mutual funds

JEL Classification: G23, G24

Suggested Citation

Hwang, Chuan-Yang and Titman, Sheridan and Wang, Yuxi, Is it Who You Know or What You Know? Evidence from IPO Allocations and Mutual Fund Performance (December 1, 2015). Available at SSRN: https://ssrn.com/abstract=2717854 or http://dx.doi.org/10.2139/ssrn.2717854

Chuan-Yang Hwang (Contact Author)

Nanyang Technological University (NTU) ( email )

Singapore, 639798
Singapore
65-67905003 (Phone)
65-6791-3697 (Fax)

Sheridan Titman

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-232-2787 (Phone)
512-471-5073 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yuxi Wang

Shanghai Jiao Tong University - Antai College of Economics and Management ( email )

No.535 Fahuazhen Road
Shanghai Jiao Tong University
Shanghai, Shanghai 200052
China

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