The Impact Of Fund Managers’ Social Network On Fund Performance

All the behaviors of each individual are embedded in the social network,and decisions of individuals or organizations are affected by the social network inevitably.Especially in China,‘guanxi’ and ‘small-world’ culture has become a social phenomenon.Under this cultural background and social phenomenon,this paper applies the social network analysis to study the network effect in capital market,focusing on the relationship between social network of fund managers and fund performance.In the empirical test part,taken the school ties,work ties and also the social interactions within same city in the account,the paper looks into the social network from these three aspects,and studies its impact on fund performance and investing ability.Furthermore,it also tries to explain the effect by the underlying private information transmission.The key findings are as follows.First,the social network of the fund managers has a positive effect on the fund performance,but only the close and direct social network.The indirect network has a negative effect on fund performance.Second,the mechanism of this network effect on fund performance and fund invest ability is based on the transmission of private information within the network.The social network acts as a more trustable,reliable,active source and platform for communication and information exchange.Through interacting with each other,fund managers tend to provide,exchange and transmit information that is related to the market.Therefore,with broader,deeper and closer social network,the fund managers tend to gather more private information,which helps them to capture investment opportunities in time and get excess returns.Third,with broader direct social network of fund managers,the fund is more likely to have the securities selection and timing ability;the more indirect social network the fund managers own,or the closer their social network is,the fund is more likely to have securities selection ability,while less likely to have timing ability.Moreover,the paper found that this effect on information transmitting of social network is slightly different under different market trend.