Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • October 2008
  • Article
  • Journal of Political Economy

The Small World of Investing: Board Connections and Mutual Fund Returns

By: Lauren Cohen, Andrea Frazzini and Christopher J. Malloy
  • Format:Print
  • | Pages:29
ShareBar

Abstract

This paper uses social networks to identify information transfer in security markets. We focus on connections between mutual fund managers and corporate board members via shared education networks. We find that portfolio managers place larger bets on firms they are connected to through their network, and perform significantly better on these holdings relative to their non-connected holdings. A replicating portfolio of connected stocks outperforms a replicating portfolio of non-connected stocks by up to 7.8% per year. Returns are concentrated around corporate news announcements, consistent with mutual fund managers gaining an informational advantage through the education networks. Our results suggest that social networks may be an important mechanism for information flow into asset prices.

Keywords

Financial Markets; Information Management; Social and Collaborative Networks; Announcements; Investment Portfolio; Investment Return; Investment Funds; Asset Pricing; Governing and Advisory Boards

Citation

Cohen, Lauren, Andrea Frazzini, and Christopher J. Malloy. "The Small World of Investing: Board Connections and Mutual Fund Returns." Journal of Political Economy 116, no. 5 (October 2008): 951–979. (Winner of the Barclays Global Investors Award, Best Paper in Asset Pricing, European Finance Association 2007.)
  • Find it at Harvard
  • Read Now

About The Author

Lauren H. Cohen

Finance
→More Publications

More from the Authors

    • May 2025
    • Faculty Research

    'Net Zero in Action': Impact Investing at the McKnight Foundation

    By: Lauren Cohen, Christina R. Wing and Sophia Pan
    • May 2025
    • Faculty Research

    The Micro-Family Office: Aamir Rehman

    By: Lauren Cohen and Sophia Pan
    • April 2025
    • Faculty Research

    Techint: Strategic Choices for Community Impact

    By: Lauren Cohen, Virak Prum, Kenneth Charman, Pedro Levindo and Mariana Cal
More from the Authors
  • 'Net Zero in Action': Impact Investing at the McKnight Foundation By: Lauren Cohen, Christina R. Wing and Sophia Pan
  • The Micro-Family Office: Aamir Rehman By: Lauren Cohen and Sophia Pan
  • Techint: Strategic Choices for Community Impact By: Lauren Cohen, Virak Prum, Kenneth Charman, Pedro Levindo and Mariana Cal
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College.