The Investment Value of Fund Managers’ Experience Outside the Financial Sector
The Review of Financial Studies, Forthcoming
52 Pages Posted: 26 Feb 2018
Date Written: February 12, 2018
Human capital acquired while working in other industries before joining fund management provides fund managers with an information advantage. Fund managers exploit this advantage by overweighting their experience industries and by picking outperforming stocks from these industries. These managers’ superior information is impounded into stock prices slowly, suggesting that their information is unique and takes a while to be discovered by the markets. Families exploit their manager’s industry-specific human capital by broadly employing their investment ideas in other funds. The investment value of industry experience is unaffected by whether or not the manager with such experience is in a team.
Keywords: Investor Learning, Investor Experience, Mutual funds
JEL Classification: G23, D83, J24
Suggested Citation: Suggested Citation