The Neighbor's Portfolio: Word-of-Mouth Effects in the Holdings and Trade of Money Managers

Harrison Hong, Jeffrey D. Kubik and Jeremy Stein ()

No 9711, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A mutual-fund manager is more likely to hold (or buy, or sell) a particular stock in any quarter if other managers in the same city are holding (or buying, or selling) that same stock. This pattern shows up even when controlling for the distance between the fund manager and the stock in question, so it is distinct from a local-preference effect. It is also robust to a variety of controls for investment styles. These results can be interpreted in terms of an epidemic model in which investors spread information about stocks to one another by word of mouth.

JEL-codes: D83 G11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn and nep-geo
Date: 2003-05
Note: AP CF
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