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Network Centrality and Delegated Investment Performance

Rossi, A. G., Blake, D., Timmermann, A., Tonks, I. and Wermers, R. (2018). Network Centrality and Delegated Investment Performance. Journal of Financial Economics, 128(1), pp. 183-206. doi: 10.1016/j.jfineco.2018.02.003

Abstract

We document 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.

Publication Type: Article
Additional Information: © 2017, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/
Publisher Keywords: Asset management, Networks, Investment performance, Flows, Manager skills
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
H Social Sciences > HG Finance
Departments: Cass Business School > Finance
URI: http://openaccess.city.ac.uk/id/eprint/17528
[img] Text - Accepted Version
This document is not freely accessible until 19 August 2019 due to copyright restrictions.
Available under License Creative Commons Attribution Non-commercial No Derivatives.

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