47 Pages Posted: 2 Jun 2003
Date Written: May 2003
A mutual-fund manager is more likely to hold (or buy, or sell) a particular stock in any quarter if other managers in the same city are holding (or buying, or selling) that same stock. This pattern shows up even when controlling for the distance between the fund manager and the stock in question, so it is distinct from a local-preference effect. It is also robust to a variety of controls for investment styles. These results can be interpreted in terms of an epidemic model in which investors spread information about stocks to one another by word of mouth.
Suggested Citation: Suggested Citation
Kubik, Jeffrey D. and Hong, Harrison G. and Stein, Jeremy C., Thy Neighbor's Portfolio: Word-of-Mouth Effects in the Holdings and Trades of Money Managers (May 2003). Harvard Institute of Economic Research Discussion Paper No. 2006. Available at SSRN: https://ssrn.com/abstract=331140 or http://dx.doi.org/10.2139/ssrn.331140