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© notice, is given to the source. Thy Neighbor’s Portfolio: Word-of-Mouth Effects in the Holdings and Trades of Money Managers

By Harrison Hong, Jeffrey D. Kubik and Jeremy C. SteinHarrison Hong, Jeffrey D. Kubik and Jeremy C. SteinJel No. D, Harrison Hong, Jeffrey D. Kubik and Jeremy C. Stein


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

Year: 2003
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