Finding Information in Obvious Places: Work Connections and Mutual Fund Investment Ideas

59 Pages Posted: 28 Dec 2019 Last revised: 15 Sep 2020

See all articles by Egemen Genc

Egemen Genc

University of Illinois at Chicago

Sara Shirley

Middle Tennessee State University

Jeffrey Stark

Middle Tennessee State University

Hai Tran

Loyola Marymount University - Department of Finance

Date Written: December 3, 2019

Abstract

Mutual funds with managers who share a work connection have greater overlap in portfolio holdings, equity purchases, and equity sales. This relationship develops after a work connection begins and persists after the 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. We find that equity purchases shared through work connections outperform non-connected purchases. Tests on reciprocal trading suggest that quid pro quo expectations motivate managers to share valuable investment ideas.

Keywords: mutual fund, investment ideas, information sharing, social connections, work connections, portfolio overlap

JEL Classification: G11

Suggested Citation

Genc, Egemen and Shirley, Sara and Stark, Jeffrey and Tran, Hai, Finding Information in Obvious Places: Work Connections and Mutual Fund Investment Ideas (December 3, 2019). Available at SSRN: https://ssrn.com/abstract=3497725 or http://dx.doi.org/10.2139/ssrn.3497725

Egemen Genc

University of Illinois at Chicago ( email )

1200 W Harrison St
Chicago, IL 60607
United States

Sara Shirley

Middle Tennessee State University ( email )

Murfreesboro, TN 37132
United States

Jeffrey Stark (Contact Author)

Middle Tennessee State University ( email )

Murfreesboro, TN
United States

Hai Tran

Loyola Marymount University - Department of Finance ( email )

Los Angeles, CA 90045
United States

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