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

Swiss Finance Institute, UNIL

Luciano Somoza

University of Lausanne, HEC; Swiss Finance Institute

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

Swiss Finance Institute, UNIL ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland
0797605012 (Phone)

Luciano Somoza (Contact Author)

University of Lausanne, HEC ( email )

Quartier Chambronne
Lausanne, Vaud CH-1015
Switzerland

HOME PAGE: http://www.lucianosomoza.com

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland
+41 797322881 (Phone)

HOME PAGE: http://www.lucianosomoza.com

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