City Size and Fund Performance
Journal of Financial Economics, 2009, 92, 252-275
55 Pages Posted: 14 Mar 2006 Last revised: 3 Sep 2015
Date Written: December 1, 2005
The literature predicts that the average skill level and productivity are higher in larger cities. Prior studies use workers’ wage or education differentials to indirectly link city size and output. This article relates city size and productivity directly, using performance data of U.S. equity mutual funds. On average, funds in financial centers perform better than other funds in terms of both gross and risk-adjusted returns, but this difference is driven only by more experienced managers. Among funds in financial centers there is strong evidence of a positive relation between performance and manager experience in a given city, especially among New York funds. More importantly, we observe performance improvements of the same manager at the same fund in financial centers but not elsewhere. Our tests provide novel evidence of knowledge spillovers and learning in cities.
Keywords: Information spillovers, Labor market, Mutual funds, Performance evaluation
JEL Classification: G23, J24
Suggested Citation: Suggested Citation