The small world of investing
Subtitle: board connections and mutual fund returns
By: Lauren H. Cohen, Andrea Frazzini, Christopher Malloy
Contributors: Frazzini, Andrea; Malloy, Christopher J.; Harvard Business School
Series: Working paper / Harvard Business School -- 08-055; Working paper (Harvard Business School) -- 08-055
Publisher: Harvard Business School
Published: 2008
Place of publication: Boston]
Language: eng
Number of pages: 48
Description: This paper uses social networks to identify information transfer in security markets. We focus on connections between mutual fund managers and corporate board members via shared education networks. We find that portfolio managers place larger bets on firms they are connected to through their network, and perform significantly better on these holdings relative to their non-connected holdings. A replicating portfolio of connected stocks outperforms a replicating portfolio of non-connected stocks by up to 8.4% per year. Returns are concentrated around corporate news announcements, consistent with mutual fund managers gaining an informational advantage through the education networks. Our results suggest that social networks may be an important mechanism for information flow into asset prices.
Notes: "January 2008"--Publisher's web site.

Includes bibliographical references.