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The Investment Value of Fund Managers’ Experience outside the Financial Sector

Author

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  • Gjergji Cici
  • Monika Gehde-Trapp
  • Marc-André Göricke
  • Alexander Kempf

Abstract

Human capital acquired while working in other industries before joining fund management provides fund managers with an information advantage. Fund managers exploit this advantage by overweighting their experience industries and by picking outperforming stocks from these industries. These managers’ superior information is impounded into stock prices slowly, suggesting that their information is unique and takes a while to be discovered by the markets. Families exploit their manager’s industry-specific human capital by broadly employing their investment ideas in other funds. The investment value of industry experience is unaffected by whether or not the manager with such experience is in a team. Received August 25, 2016; editorial decision December 24, 2017 by Editor Andrew Karolyi.

Suggested Citation

  • Gjergji Cici & Monika Gehde-Trapp & Marc-André Göricke & Alexander Kempf, 2018. "The Investment Value of Fund Managers’ Experience outside the Financial Sector," The Review of Financial Studies, Society for Financial Studies, vol. 31(10), pages 3821-3853.
    • Handle: RePEc:oup:rfinst:v:31:y:2018:i:10:p:3821-3853.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhy019
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    Citations

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    Cited by:

    1. Zhang, Wei & Li, Yi, 2021. "Do visiting monks give better sermons? An analysis of the foreign experience of Chinese fund managers," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 75(C).
    2. Cici, Gjergji & Kempf, Alexander & Peitzmeier, Claudia, 2022. "Knowledge spillovers in the mutual fund industry through labor mobility," Journal of Banking & Finance, Elsevier, vol. 134(C).
    3. Ole‐Kristian Hope & Pingui Rao & Yanping Xu & Heng Yue, 2023. "Information sharing between mutual funds and auditors," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 50(1-2), pages 152-197, January.
    4. Cici, Gjergji & Hendriock, Mario & Jaspersen, Stefan & Kempf, Alexander, 2019. "#MeToo meets the mutual fund industry: Productivity effects of sexual harassment," CFR Working Papers 19-03, University of Cologne, Centre for Financial Research (CFR).
    5. Mao, Mike Qinghao & Wong, Ching Hin, 2022. "Managerial commitment and heterogeneity in target-date funds," Journal of Empirical Finance, Elsevier, vol. 68(C), pages 1-19.
    6. Huang, Ying Sophie & Liang, Bing & Wu, Kai, 2021. "Are mutual fund manager skills transferable to private funds?," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 614-638.
    7. Gehde-Trapp, Monika & Klingler, Linda, 2022. "The effect of sentiment on institutional investors: A gender analysis," CFR Working Papers 22-08, University of Cologne, Centre for Financial Research (CFR).
    8. Chen, Jean Jinghan & Xie, Li & Zhou, Si, 2020. "Managerial multi-tasking, Team diversity, and mutual fund performance," Journal of Corporate Finance, Elsevier, vol. 65(C).
    9. Cici, Gjergji & Schuster, Philipp & Weishaupt, Franziska, 2024. "Once a trader, always a trader: The role of traders in fund management," CFR Working Papers 24-01, University of Cologne, Centre for Financial Research (CFR).
    10. Alexander Cochard & Stephan Heller & Vitaly Orlov, 2018. "In Military We Trust: The Effect of Managers' Military Background on Mutual Fund Flows," Working Papers on Finance 1826, University of St. Gallen, School of Finance.
    11. Agarwal, Vikas & Cochardt, Alexander Elmar & Orlov, Vitaly, 2022. "Birth order and fund manager's trading behavior: Role of sibling rivalry," CFR Working Papers 22-12, University of Cologne, Centre for Financial Research (CFR).
    12. Ivan E. Brick & Yuzi Chen & Jun‐Koo Kang & Jin‐Mo Kim, 2024. "Does hedge fund managers’ industry experience matter for hedge fund activism?," Financial Management, Financial Management Association International, vol. 53(1), pages 59-97, March.
    13. Bai, John Jianqiu & Tang, Yuehua & Wan, Chi & Yüksel, H. Zafer, 2022. "Fund manager skill in an era of globalization: Offshore concentration and fund performance," Journal of Financial Economics, Elsevier, vol. 145(2), pages 18-40.
    14. Neupane, Suman & Thapa, Chandra & Vithanage, Kulunu, 2023. "Context‐specific experience and institutional investors’ performance," Journal of Banking & Finance, Elsevier, vol. 149(C).
    15. Antoniou, Constantinos & Mitali, Shema F., 2023. "Do stock-level experienced returns influence security selection?," Journal of Banking & Finance, Elsevier, vol. 157(C).

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