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Geography and Local (Dis)advantage: Evidence from Muni Bond Funds

Author

Listed:
  • Saiying Deng

    (College of Business, Southern Illinois University Carbondale, Carbondale, IL 62901, USA)

  • David Rakowski

    (University of Texas at Arlington, Finance & Real Estate Department, 701 S. West Street-Suite 434, P.O. Box 19449, Arlington TX, 76010, USA)

Abstract

We examine the relationship between the geographic location of mutual fund managers and fund performance using the unique setting of single-state municipal-bond mutual funds. We find that local managers underperform non-local muni-bond fund managers. Furthermore, we document that local muni-bond fund managers perform relatively better in states with more local funds, consistent with knowledge spillovers, business connections and networking effects associated with those areas. Locals also perform relatively better in states with higher levels of political integrity, consistent with less political pressure on local fund managers in these locations. Our results are robust to several sensitivity checks.

Suggested Citation

  • Saiying Deng & David Rakowski, 2016. "Geography and Local (Dis)advantage: Evidence from Muni Bond Funds," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 6(03), pages 1-24, September.
    • Handle: RePEc:wsi:qjfxxx:v:06:y:2016:i:03:n:s2010139216500087
    DOI: 10.1142/S2010139216500087
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