Information Pools and Insider Trading: A Snapshot of America's Financial Elite.

42 Pages Posted: 24 Mar 2021

See all articles by Antoine Didisheim

Antoine Didisheim

The University of Melbourne; Swiss Finance Institute

Luciano Somoza

ESSEC Business School

Date Written: March 23, 2021

Abstract

We document abnormal correlations between hedge funds' performance among managers sharing similar elite socio-economic backgrounds. In particular, Columbia, Harvard, University of Pennsylvania, Stanford, and NYU alumni are highly correlated among themselves. We take steps toward linking this phenomenon to a shared information pool with a quasi-natural experiment: the 2009 Galleon Capital insider trading scandal. The difference-in-difference analysis shows a significant reduction in returns of the elite managers following the scandal. Finally, we present evidences suggesting that investors recognize this pool's value, as funds likely to have access to elite information are associated with 55% higher assets under management at launch.

Keywords: network, hedge funds, Ivy league, information flows, insider trading

Suggested Citation

Didisheim, Antoine and Somoza, Luciano, Information Pools and Insider Trading: A Snapshot of America's Financial Elite. (March 23, 2021). Swiss Finance Institute Research Paper No. 21-28, Available at SSRN: https://ssrn.com/abstract=3810897 or http://dx.doi.org/10.2139/ssrn.3810897

Antoine Didisheim

The University of Melbourne ( email )

Parkville, 3010
Australia
0435776821 (Phone)

Swiss Finance Institute ( email )

University of Melbourne
Melbourne, VA
Australia
0797605012 (Phone)

Luciano Somoza (Contact Author)

ESSEC Business School ( email )

3 Avenue Bernard Hirsch
CS 50105 CERGY
CERGY, CERGY PONTOISE CEDEX 95021
France

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