Social learning and analyst behavior
| Authors | Kumar, Rantala, Xu |
| Journal | Journal of Financial Economics |
| Year | 2022 |
| Type | Published Paper |
| Abstract | This study examines whether sell-side equity analysts engage in social learning in which their earnings forecasts for certain firms are influenced by the forecasts and outcomes of peer analysts associated with other firms in their respective portfolios. We find that analyst optimism is negatively correlated with recent forecast errors, by peers, on other firms in the analyst's portfolio. An analyst is also more likely to issue bold forecasts when peers recently issued similar forecasts for other portfolio firms. Analysts learn more from peers with similar personal characteristics. Overall, social learning benefits analysts and improves their forecast accuracy. |
| URL | https://www.sciencedirect.com/science/article/abs/pii/S0304405X21002774 |
| Tags | Archival Empirical | Productivity Spillovers |
Social learning and analyst behavior
| Authors | Kumar, Rantala, Xu |
| Journal | Journal of Financial Economics |
| Year | 2022 |
| Type | Published Paper |
| Abstract | This study examines whether sell-side equity analysts engage in "social learning" in which their earnings forecasts for certain firms are influenced by the forecasts and outcomes of "peer" analysts associated with other firms in their respective portfolios. We find that analyst optimism is negatively correlated with recent forecast errors, by peers, on other firms in the analyst's portfolio. An analyst is also more likely to issue "bold" forecasts when peers recently issued similar forecasts for other portfolio firms. Analysts learn more from peers with similar personal characteristics. Overall, social learning benefits analysts and improves their forecast accuracy. |
| Keywords | Sell-side equity analysts, social learning, bold forecasts, forecast accuracy |
| URL | https://www.sciencedirect.com/science/article/pii/S0304405X21002774 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency |
The power of profanity: The meaning and impact of swear words in word of mouth
| Authors | Lafreniere, Moore, Fisher |
| Journal | Journal of Marketing Research |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Swearing can violate norms and thereby offend consumers. Yet the prevalence of swear word use suggests that an offensiveness perspective may not fully capture their impact in marketing. This article adopts a linguistic perspective to develop and test a model of how, why, and when swear word use affects consumers in online word of mouth. In two field data sets and four experiments, the authors show that relative to reviews with no swear words, or with non-swear-word synonyms (e.g., super), reviews with swear words (e.g., damn) impact review readers. First, reviews with swear words are rated as more helpful. Second, when a swear word qualifies a desirable [undesirable] product attribute, readers' attitudes toward the product increase [decrease] (e.g., "This dishwasher is damn quiet [loud]!"). Swear words impact readers because they convey meaning about (1) the reviewer and (2) the topic (product) under discussion. These two meanings function as independent, parallel mediators that drive the observed effects. Further, these effects are moderated by swear word number and style: they do not emerge when a review contains many swear words and are stronger for uncensored and euphemistic swear words (e.g., darn) than censored swear words (e.g., d*mn). Overall, swear words in reviews provide value to readers-and review platforms-because they efficiently and effectively convey two meanings. |
| URL | https://journals.sagepub.com/doi/full/10.1177/00222437221078606 |
| Tags | Archival Empirical | Consumer Decisions | Experimental / Survey-Based Empirical |
Differential treatment and local information advantage: Revelations from translation differences
| Authors | Lang, Stice-Lawrence, Wong, Wong |
| Year | 2022 |
| Type | Working Paper |
| Abstract | We develop an empirical proxy for the differential treatment of local and foreign investors using translation differences in public disclosure as observable indicators that reflect non-public interactions. After confirming the validity of our proxy, we show that differential treatment results in significant information asymmetry between local and foreign investors as measured through stock illiquidity, and analysis of analyst forecast errors suggests that this information asymmetry is created by firms providing foreign market participants with lower quality information. Firms respond to strategic incentives for differential treatment relating to government subsidies and capital raising, and thus differential treatment is not just a byproduct of resource constraints. Our results highlight the role of differential treatment as one driver of local information advantage. |
| Keywords | Differential treatment, local information advantage, translation differences, financial disclosure, information asymmetry, textual analysis, globalization |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3956105&dgcid=ejournal_htmlemail_capital:markets:market:efficiency:ejournal_abstractlink |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Manager / Firm Behavior | Media and Textual Analysis |
The long-lasting effects of living under communism on attitudes towards financial markets
| Authors | Laudenbach, Malmendier, Niessen-Ruenzi |
| Year | 2022 |
| Type | Working Paper |
| Abstract | We analyze the long-term effects of living under communism and its anticapitalist doctrine on households' financial investment decisions and attitudes towards financial markets. Utilizing comprehensive German brokerage data and bank data, we show that, decades after Reunification, East Germans still invest significantly less in the stock market than West Germans. Consistent with communist friends-and-foes propaganda, East Germans are more likely to hold stocks of companies from communist countries (China, Russia, Vietnam) and of state-owned companies, and are unlikely to invest in American companies and the financial industry. Effects are stronger for individuals exposed to "positive emotional tagging", e. g., those living in celebrated showcase cities. Effects reverse for individuals with negative experiences, e.g., environmental pollution, religious oppression, or lack of (Western) TV entertainment. Election years trigger further divergence of East and West Germans. We provide evidence of negative welfare consequences due to less diversified portfolios, higher-fee products, and lower risk-adjusted returns. |
| Keywords | Capital markets, communism, memory, emotional tagging, stock-market participation |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3526926 |
| Tags | Archival Empirical | Experimental / Survey-Based Empirical | Financing- and Investment Decisions (Individual) |
Shall we talk? The role of interactive investor platforms in corporate communication
| Authors | Lee, Zhong |
| Journal | Journal of Accounting and Economics |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Between 2010 and 2017, Chinese investors used an investor interactive platform (IIP) to ask public companies around 2.5 million questions, the vast majority of which received a reply within two weeks. We analyze these IIP dialogues using a BERT-based algorithm and provide preliminary evidence on their causes and consequences. Our analyses show most questions reflect investors' difficulties in processing information already in the public domain. Controlling for other news, higher IIP activity is associated with increases in trading volume, return volatility, market liquidity, and price informativeness as well as decreases in bid-ask spread. Financial statement-related postings increase around the adoption of new accounting standards. Collectively, our results show that investors face significant information processing costs but that IIP activities help reduce these costs, leading to improvements in stock price formation. |
| Keywords | Corporate disclosure, investor relations, information processing costs, interactive communication, market liquidity, price informativeness |
| URL | https://www.sciencedirect.com/science/article/pii/S0165410122000477 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Manager / Firm Behavior |
The politics of management earnings expectations
| Authors | Liu, Na, Nagar, Yan |
| Year | 2022 |
| Type | Working Paper |
| Abstract | This study documents that CEOs' expectations about firm performance are more negatively biased in periods when the White House is governed by the political party that the CEOs did not contribute to, relative to periods when the White House is occupied by the CEOs' party. This negative bias holds as strongly toward the end of the year, suggesting that CEOs do not revise their priors in response to new information. The results are stronger for firms whose performance is more correlated with the general economic conditions, consistent with managers' biased beliefs about the economy driving the results. Upon facing an opposing presidency, the sensitivity of CEOs' capital investments to cash flow decreases, relative to their politically aligned years. By contrast, actual firm performance is largely unaffected. Overall, our results highlight the importance of political partisan bias in shaping |
| Keywords | Managerial biases, partisan conflict, earnings expectations, CEO earnings forecasts |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3950975&dgcid=ejournal_htmlemail_capital:markets:market:efficiency:ejournal_abstractlink |
| Tags | Archival Empirical | Manager / Firm Behavior |
A framework for analyzing influencer marketing in social networks: Selection and scheduling of influencers
| Authors | Mallipeddi, Kumar, Sriskandarajah, Zhu |
| Journal | Management Science |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Explosive growth in the number of users on various social media platforms has transformed the way firms strategize their marketing activities. To take advantage of the vast size of social networks, firms have now turned their attention to influencer marketing wherein they employ independent influencers to promote their products on social media platforms. Despite the recent growth in influencer marketing, the problem of network seeding (i.e., identification of influencers to optimally post a firm's message or advertisement) neither has been rigorously studied in the academic literature nor has been carefully addressed in practice. We develop a data-driven optimization framework to help a firm successfully conduct (i) short-horizon and (ii) long-horizon influencer marketing campaigns, for which two models are developed, respectively, to maximize the firm's benefit. The models are based on the interactions with marketers, observation of firms' message placements on social media, and model parameters estimated via empirical analysis performed on data from Twitter. Our empirical analysis discovers the effects of collective influence of multiple influencers and finds two important parameters to be included in the models, namely, multiple exposure effect and forgetting effect. For the short-horizon campaign, we develop an optimization model to select influencers and present structural properties for the model. Using these properties, we develop a mathematical programming based polynomial time procedure to provide near-optimal solutions. For the long-horizon problem, we develop an efficient solution procedure to simultaneously select influencers and schedule their message postings over a planning horizon. We demonstrate the superiority of our solution strategies for both short- and long-horizon problems against multiple benchmark methods used in practice. Finally, we present several managerially relevant insights for firms in the influencer marketing context. |
| URL | https://pubsonline.informs.org/doi/epdf/10.1287/mnsc.2020.3899 |
| Tags | Archival Empirical | Manager / Firm Behavior | Theory |
Fifty shades of hatred and discontent - varieties of anti-finance discourses on the European Twitter (France, Germany, Italy, Spain and the UK)
| Authors | Massoc |
| Year | 2022 |
| Type | Working Paper |
| Abstract | Are we in a new "Polanyian moment"? If we are, it is essential to examine how "spontaneous" and punctual expressions of discontent at the individual level may give rise to collective discourses driving social and political change. It is also important to examine whether and how the framing of these discourses may vary across political economies. This paper contributes to this endeavor with the analysis of anti-finance discourses on Twitter in France, Germany, Italy, Spain and the UK between 2019 and 2020. This paper presents three main findings. First, the analysis shows that, more than ten years after the financial crisis, finance is still a strong catalyzer of political discontent. Second, it shows that there are important variations in the dominant framing of public anti-finance discourses on social media across European political economies. If the antagonistic "us versus them" is prominent in all the cases, the identification of who "us" and "them" are, vary significantly. Third, it shows that the presence of far-right tropes in the critique of finance varies greatly from virtually inexistent to a solid minority of statements. |
| Keywords | Finance, opinion, social media, discourse analysis |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4008884&dgcid=ejournal_htmlemail_capital:markets:market:efficiency:ejournal_abstractlink |
| Tags | Archival Empirical | Media and Textual Analysis |
Influencing social media influencers through affiliation
| Authors | Pei, Mayzlin |
| Journal | Marketing Science |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Social media influencers are category enthusiasts who often post product recommendations. Firms sometimes pay influencers to skew their product reviews in favor of the firm. We ask the following research questions. First, what is the optimal level of affiliation (if any) from the firm's perspective? Affiliation introduces positive bias to the influencer's review but also decreases the persuasiveness of the review. Second, because affiliated reviews are often biased in favor of the firm, what is the impact of affiliation on consumer welfare? We find that the affiliation decision depends on the cost of information acquisition, the consumer's prior and awareness, and the disclosure regime. When the consumer's prior belief is low, the firm needs to affiliate less closely or not at all in order to preserve the influencer's persuasiveness, the change in the consumer's belief following the influencer's review. In contrast, when the consumer's prior belief is high, the firm fully affiliates with the influencer to both maximize awareness and prevent a negative review. We also show that the firm's involvement can be Pareto improving if the information acquisition cost is relatively high, and a partial disclosure rule may increase consumer welfare. |
| URL | https://pubsonline.informs.org/doi/abs/10.1287/mksc.2021.1322 |
| Tags | Archival Empirical | Manager / Firm Behavior |
The effects of consumer preference and peer influence on trial of an experience good
| Authors | Pyo, Lee, Park |
| Journal | Journal of Marketing Research |
| Year | 2022 |
| Type | Published Paper |
| Abstract | This research examines the interaction effect of two dimensions of preference on social contagion: preference similarity between a consumer (i.e., who seeks recommendation) and a peer (i.e., who potentially provides recommendation) and the fit of an experience good with the consumer's preference. For empirical analyses, the authors collected rich information from Last.fm, a music social networking website, including individual users' music play histories, friendship information, social tags (i.e., user-generated keywords associated with artists and songs), and new song profiles. The results show that consumers' trial of a song that fits less with their preference is influenced more by peers with similar preferences. By contrast, consumers' trial of a song that fits more with their preference is influenced more by peers with dissimilar preferences. This research enriches the understanding of the nuanced role of preference in social contagion and offers managerial implications to better leverage social dynamics. |
| URL | https://journals.sagepub.com/doi/abs/10.1177/00222437221093603 |
| Tags | Archival Empirical | Consumer Decisions |
Social contagion and asset prices: Reddit's self-organised bull runs
| Authors | Semenova, Winkler |
| Year | 2022 |
| Type | Working Paper |
| Abstract | This paper develops an empirical and theoretical case for how `hype' among retail investors can drive large asset price fluctuations. We use text data from discussions on WallStreetBets (WSB), an online investor forum with over eleven million followers as of February 2022, as a case study to demonstrate how retail investors influence each other, and how social behaviors impact financial markets. We document that WSB users adopt price predictions about assets (bullish or bearish) in part due to the sentiments expressed by their peers. Discussions about stocks are also self-perpetuating: narratives about specific assets spread at an increasing rate before peaking, and eventually diminishing in importance -- a pattern reminiscent of an epidemiological setting. To consolidate these findings, we develop a model for the impact of social dynamics among retail investors on asset prices. We find that the interplay between 'trend following' and 'consensus formation' determines the stability of price returns, with socially-driven investing potentially causing oscillations and cycles. Our framework helps identify components of asset demand stemming from social dynamics, which we predict using WSB data. Our predictions explain significant variation in stock market activity. These findings emphasize the role that social dynamics play in financial markets, amplified by online social media. |
| Keywords | Social media analysis, sentiment contagion, asset prices |
| URL | https://arxiv.org/abs/2104.01847 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Financing- and Investment Decisions (Individual) | Media and Textual Analysis | Theory |
Let me show you what I did versus what I have: Sharing experiential versus material purchases alters authenticity and liking of social media users
| Authors | Valsesia, Diehl |
| Journal | Journal of Consumer Research |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Social media may encourage novel ways of signaling that involve different purchase types (experiential vs. material), signaling frequencies (multiple vs. single signals), and other features unique to social media (e.g., hashtags). This work examines how purchase signals are received on social media and how these signaling variations affect signal receivers' perceptions of the authenticity of social media posts as well as the overall impressions receivers form of the signal sender. Data collected across six experiments show multiple material purchase signals lead to more negative impressions compared to multiple experiential purchase signals. Signal receivers perceive multiple material purchase posts as less authentic, which dampens their impressions of the signal sender. In line with this mechanism, the impression premium of experiential purchase signals disappears when receivers use other cues (monetary mentions, other users' comments, and marketer associations via hashtags) to infer a signal's lack of authenticity. Additional data also document downstream consequences on engagement. This work contributes theoretically to research in both signaling and social media and improves the understanding of substantive situations in which consumers' objectives of curating a positive image and creating engagement with their posts, collide with marketers' objectives of encouraging user-generated content and word of mouth. |
| Keywords | Signaling, social media, impression management, word of mouth, engagement, influencer |
| URL | https://academic.oup.com/jcr/article-abstract/49/3/430/6444995?redirectedFrom=fulltext |
| Tags | Archival Empirical | Consumer Decisions | Experimental / Survey-Based Empirical | Theory |
Entrepreneurial spillovers across coworkers
| Authors | Wallskog |
| Journal | Review of Financial Studies |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Using large-scale administrative data, I track the employment and entrepreneurship of over forty million Americans and investigate entrepreneurial spillovers across coworkers, based on the idea that individuals who start their own firms learn institutional knowledge and entrepreneurial skills that they may teach others. I find that an individual whose current coworkers have more prior entrepreneurship experience is more likely to become an entrepreneur themself within the next five years, and these spillovers are strongest among workers with similar jobs and demographics. Furthermore, an individual is more likely to become a successful entrepreneur if those coworkers were themselves successful entrepreneurs. To quantify the role of these spillovers, I build a structural model of entrepreneurship and learning and estimate that the aggregate entrepreneurship rate would be 10% lower in the absence of learning. |
| Keywords | Spillovers, peer effect, entrepreneurship, social learning |
| URL | https://melaniewallskog.github.io/files/wallskog_jmp.pdf |
| Tags | Archival Empirical | Experimental / Survey-Based Empirical | Productivity Spillovers | Social Network Structure |
Down a rabbit hole: How prior media consumption shapes subsequent media consumption
| Authors | Woolley, Sharif |
| Journal | Journal of Marketing Research |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Consumers often become "stuck in a rabbit hole" when consuming media. They may watch several YouTube videos in the same category or view several thematically similar artistic images on Instagram in a row, finding it difficult to stop. What causes individuals to choose to consume additional media on a topic that is similar to (vs. different from) what they just experienced? The authors examine a novel antecedent: the consecutive consumption of multiple similar media. After viewing multiple similar media consecutively, more consumers choose to (1) view additional similar media over dissimilar media or (2) complete a dissimilar activity entirely, even when the prior consumption pattern is externally induced. The rabbit hole effect occurs because of increased accessibility of the shared category: when a category is more accessible, people feel immersed in it and anticipate that future options within that category will be more enjoyable. The authors identify three characteristics of media consumption that contribute to the rabbit hole effect by increasing category accessibility: similarity, repetition, and consecutiveness of prior media consumption. This research contributes to literature on technology, choice, and variety seeking, and it offers implications for increasing (vs. slowing) similar consumption. |
| URL | https://journals.sagepub.com/doi/abs/10.1177/00222437211055403 |
| Tags | Archival Empirical | Consumer Decisions |
Customer review provision policies with heterogeneous cluster preferences
| Authors | Xiao, Chen, Tang |
| Journal | Management Science |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Companies often post user-generated reviews online so that potential buyers in different clusters (age, geographic region, occupation, etc.) can learn from existing customers about the quality of an experience good and cluster preferences before purchasing. In this paper, we evaluate two common user-generated review provision policies for selling experience goods to customers in different clusters with heterogeneous preferences. The first policy is called the association-based policy (AP) under which a customer in a cluster can only observe the aggregate review (i.e., average rating) generated by users within the same cluster. The second policy is called the global-based policy (GP) under which each customer is presented with the aggregate review generated by all users across clusters. We find that, in general, the firm benefits from a policy that provides a larger number of "relevant reviews" to customers. When customers are more certain about the product quality and when clusters are more diverse, AP is more profitable than GP because it provides cluster-specific reviews to customers. Otherwise, GP is more profitable as it provides a larger number of less relevant reviews. Moreover, we propose a third provision policy that imparts the union of the information by AP and GP and show that it is more profitable for the firm. Although the third policy always renders a higher consumer welfare than GP, it may generate a lower consumer welfare than AP. |
| URL | https://pubsonline.informs.org/doi/abs/10.1287/mnsc.2021.4138 |
| Tags | Archival Empirical | Manager / Firm Behavior |
How much is financial advice worth? The transparency-revenue tension in social trading
| Authors | Yang, Zheng, Mookerjee |
| Journal | Management Science |
| Year | 2022 |
| Type | Published Paper |
| Abstract | In social trading, less experienced investors (followers) are allowed to copy the trades of experts (traders) in real time after paying a fee. Such a copy-trading mechanism often runs into a transparency-revenue tension. On the one hand, social trading platforms need to release traders' trades as transparently as possible to allow followers to evaluate traders accurately. On the other hand, complete transparency may undercut the platform's revenue because followers can free ride. That is, followers can manually copy the trades of a trader to avoid paying the following fees. This study addresses this critical tension by optimizing the level of transparency through delaying the release of trading information pertaining to the trades executed by traders. We capture the economic impact of the delay using the notions of profit-gap and delayed-profit. We propose a mechanism that elucidates the economic effects of the profit-gap and delayed-profit on followers and, consequently, the amount of money following a trader: protection effect and evaluation effect. Empirical investigations find support for these two effects. We then develop a stochastic control formulation that optimizes platform revenue, where the control is the optimal delay customized at the trader level and calculated as a function of the current amount of money following a trader and the number of views on the trader's profile page. The optimized revenue can be incorporated into an algorithm to provide a systematic way to infuse the platform's goals into the ranking of the traders. A counterfactual study is conducted to demonstrate the performance of the optimal delay policy (versus a constant-delay policy) using data from a leading social trading platform operating in the foreign exchange market. |
| URL | https://pubsonline.informs.org/doi/abs/10.1287/mnsc.2021.4147 |
| Tags | Archival Empirical | Manager / Firm Behavior |
Investor attention or investor sentiment: How social media react to ESG?
| Authors | Zhang, Xu, Hong, Chan |
| Year | 2022 |
| Type | Working Paper |
| Abstract | The ESG (environmental, social, and governance) practice has become very important in contemporary business, and it is believed to have a significant impact on firm value. However, how investors react to firms' ESG performance is still unknown. Exploiting user-generated content from a popular online investment community (Seeking Alpha) and ESG performance scores from a professional database (Sustainalytics), we first run a fixed-effect panel regression and find an overall positive relationship between ESG and investor attention but no relationship between ESG and investor sentiment. We then conduct an event-study analysis, in which we classify changes in ESG performance as upgrade and downgrade events and find that the significant relationship between ESG and investor attention holds for the downgrade events but not for the upgrade events. We also conduct various robustness checks, on both ESG and investor attention, to rule out potential effects of other factors, such as firm size, debt, intangible assets, and profitability. Our further mechanism analysis reveals that the effect of ESG on investor attention is driven by the social and governance factors rather than the environmental factors. Our work makes both theoretical and practical contributions by identifying the nuanced effect of ESG on investors' reactions in the social media era. |
| Keywords | ESG, investor attention, investor sentiment, social media, online investment communities |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3905195&dgcid=ejournal_htmlemail_capital:markets:market:efficiency:ejournal_abstractlink |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Financing- and Investment Decisions (Individual) | Media and Textual Analysis |
Tweets we like aren't alike: Time of day affects engagement with vice and virtue tweets
| Authors | Zor, Kim, Monga |
| Journal | Journal of Consumer Research |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Consumers are increasingly engaging with content on social media platforms, such as by "following" Twitter accounts and "liking" tweets. How does their engagement change through the day for vice content offering immediate gratification versus virtue content offering long-term knowledge benefits? Examining when (morning vs. evening) engagement happens with which content (vice vs. virtue), the current research reveals a time-of-day asymmetry. As morning turns to evening, engagement shifts away from virtue and toward vice content. This asymmetry is documented in three studies using actual Twitter data-millions of data points collected every 30 minutes over long periods of time-and one study using an experimental setting. Consistent with a process of self-control failure, one of the Twitter data studies shows a theory-driven moderation of the asymmetry, and the experiment shows mediation via self-control. However, multiple processes are likely at play, as time does not unfold in isolation during a day, but co-occurs with the unfolding of multiple events. These results provide new insights into social media engagement and guide practitioners on when to post which content. |
| Keywords | Time of day, vice, virtue, content engagement, self-control failure, Twitter |
| URL | https://academic.oup.com/jcr/article-abstract/49/3/473/6463636?redirectedFrom=fulltext |
| Tags | Archival Empirical | Consumer Decisions |
Back to the roots: Ancestral origin and mutual fund manager portfolio choice
| Authors | Ammann, Cochardt, Straumann, Weigert |
| Year | 2021 |
| Type | Working Paper |
| Abstract | We exploit variation in the ancestries of U.S. equity mutual fund managers and show that ancestry affects portfolio decisions. Controlling for fund firm location, we find that funds overweight stocks from their managers' ancestral home countries in their non-U.S. portfolio by 132 bps or 20.34% compared with their peers. Similarly, funds overweight industries that are comparatively large in their manager's ancestral home countries. The documented ancestral biases are pervasive across fund styles and across different manager ancestries. The effect is more pronounced for funds that are less resource-constrained and for managers whose connection to their ancestral home country is more recent. Stocks linked to managers' ancestry do not outperform stocks in the same countries and industries but held by managers of other ancestry, confirming that ancestry-linked investments are not informed. |
| Keywords | Culture, home bias, mutual funds, portfolio choice, fund managers |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3879492 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Investment Decisions (Institutional) | Manager / Firm Behavior |