Knowing Me, Knowing You? Similarity to the CEO and Fund Managers' Investment Decisions

52 Pages Posted: 13 Jun 2017 Last revised: 6 Feb 2018

See all articles by Stefan Jaspersen

Stefan Jaspersen

University of Cologne - Centre for Financial Research (CFR); University of Cologne - Department of Finance

Peter Limbach

University of Cologne and Centre for Financial Research (CFR)

Date Written: February 1, 2018

Abstract

This study provides evidence that investors’ demographic similarity to CEOs affects their investment decisions. We find that mutual fund managers overweight firms led by CEOs who resemble them in terms of age, ethnicity and gender. This finding is robust to excluding educational and local ties and is supported by variation in similarity caused by CEO departures. Investing in firms run by similar CEOs, on average, is associated with superior performance and is more pronounced when CEOs have more impact on their firms. Results suggest that demographic similarity to CEOs facilitates informed trading, implying that investors’ information production incorporates firm management.

Keywords: CEO-Investor Similarity, Familiarity Bias, Information Advantages, Investment Decisions, Mutual Fund Performance

JEL Classification: G11, G23, J10

Suggested Citation

Jaspersen, Stefan and Limbach, Peter, Knowing Me, Knowing You? Similarity to the CEO and Fund Managers' Investment Decisions (February 1, 2018). Available at SSRN: https://ssrn.com/abstract=2984287 or http://dx.doi.org/10.2139/ssrn.2984287

Stefan Jaspersen

University of Cologne - Centre for Financial Research (CFR) ( email )

Albertus-Magnus Platz
Cologne, 50923
Germany

University of Cologne - Department of Finance ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

Peter Limbach (Contact Author)

University of Cologne and Centre for Financial Research (CFR) ( email )

Albertus-Magnus-Platz
Köln, 50923
Germany

HOME PAGE: http://www.finance.uni-koeln.de

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