Review of Financial Studies Vol. 25 No. 8 2012
No Place Like Home: Familiarity in Mutual Fund Manager Portfolio Choice
Abstract
[We show that familiarity affects the portfolio decisions of mutual fund managers. Controlling for fund location, funds overweight stocks from their managers' home states by 12% compared with their peers. In team-managed funds, home-state overweighting is 37% larger than the fund location effect. The home-state bias is stronger if the manager is inexperienced, is resource-constrained, or spent more time in his home state. Home-state stocks do not outperform other holdings, confirming that home-state investments are not informed. The overweighting also leads to excessively risky portfolios.]
- Volume
- 25
- Issue
- 8
- Pages
- 2563-2599
- Sources
- bibtex:phds-export.bib