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Network centrality and delegated investment performance

Research output: Contribution to journalArticle

Original languageEnglish
Pages (from-to)183-206
Number of pages24
JournalJournal of Financial Economics
Volume128
Issue number1
Early online date16 Feb 2018
DOIs
DateAccepted/In press - 30 Dec 2016
DateE-pub ahead of print - 16 Feb 2018
DatePublished (current) - 1 Apr 2018

Abstract

We show a positive relation between network centrality and risk-adjusted performance in a delegated investment management setting. More connected managers take more portfolio risk and receive higher investor flows, consistent with these managers improving their ability to exploit investment opportunities through their network connections. Greater network connections are shown to be particularly important in reducing the diseconomies of scale for large managers who are well connected. We also use the exogenous merger of two investment consultants, which creates a sudden change in the network connections of the managers they oversee, to provide evidence that a greater number of connections translates into better portfolio performance.

    Research areas

  • Asset management, Networks, Investment performance, Flows, Manager skills

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