Journal of Banking & Finance Vol. 134 2022
Hedge fund family ties
Abstract
Using a novel dataset, I show that hedge fund managers connected through shared employment histories hold and trade more of the same stocks than unconnected managers. A long-short portfolio of connected-unconnected overlapped trades generates 3.6% of annual alpha. Results are greater between fund-pairs with stronger social connections and longer relationships implying a socially reinforcing channel is responsible. Shock based tests confirm social channels lead to the main findings, supporting models of manager coordination. The findings identify common sources of risk and return for employment-linked hedge funds, except during severe drawdowns when common holdings are protected from fire sales.
- DOI
- 10.1016/j.jbankfin.2021.106326
- Volume
- 134
- Pages
- 106326
- Language
- en
- Sources
- crossref openalex bibtex:phds-export.bib