The Ties that Bind: Work Connections and Mutual Fund Investment Ideas
53 Pages Posted: 28 Dec 2019
Date Written: December 3, 2019
Mutual funds with managers who share a work connection have greater overlap in portfolio holdings, equity purchases, and equity sales. This result persists even after the work connection ends. Several tests to mitigate endogeneity concerns provide supportive evidence of a causal interpretation that work connections lead to the sharing of investment ideas among mutual fund managers. Finally, we find that equity purchases shared through work connections outperform non-connected purchases, particularly in fund families that provide strong incentives to compete, suggesting that managers likely share information with a quid-pro-quo expectation.
Keywords: mutual fund, investment ideas, information sharing, social connections, work connections, portfolio overlap
JEL Classification: G11
Suggested Citation: Suggested Citation