Dinner Table Alphas
Abstract
We show that household linkages, formed primarily of spousal employment ties, are important in explaining asset managers' skills and their portfolio choices. Mutual fund managers with spouses that work at the executive and C-suite levels obtain monthly gross returns of up to 0.32% above asset managers with non-executive spouses. This effect is driven largely by managers' quarterly stock trades in the industries where their spouses are employed. The spouse-industry stocks bought by executive-spouse-linked managers outperform those bought by the nonexecutive-spouse-linked managers by a large and significant 4.30% in the next quarter. Symmetrically, the stocks sold by executive-spouse linked managers underperform those sold by the nonexecutive-spouse-linked managers by a significant -4.33% in the following quarter. These patterns suggest that spousal relationships facilitate fund managers' comprehension of industry-level information. The linked fund managers' spouse-industry trades predict subsequent earnings surprises and firm level news. Overall, our results highlight the importance of household links to information production in the asset management industry.