Finding Information in Obvious Places: Work Connections and Mutual Fund Investment Ideas
59 Pages Posted: 28 Dec 2019 Last revised: 15 Sep 2020
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 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: Suggested Citation