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Information Pools and Insider Trading: A Snapshot of America's Financial Elite

Author

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  • Antoine Didisheim

    (Swiss Finance Institute, UNIL)

  • Luciano Somoza

    (University of Lausanne, HEC; Swiss Finance Institute)

Abstract

We document abnormal correlations between hedge funds' performance among managers sharing similar elite socio-economic backgrounds. In particular, Columbia, Harvard, University of Pennsylvania, Stanford, and NYU alumni are highly correlated among themselves. We take steps toward linking this phenomenon to a shared information pool with a quasi-natural experiment: the 2009 Galleon Capital insider trading scandal. The difference-in-difference analysis shows a significant reduction in returns of the elite managers following the scandal. Finally, we present evidences suggesting that investors recognize this pool's value, as funds likely to have access to elite information are associated with 55% higher assets under management at launch.

Suggested Citation

  • Antoine Didisheim & Luciano Somoza, 2021. "Information Pools and Insider Trading: A Snapshot of America's Financial Elite," Swiss Finance Institute Research Paper Series 21-28, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2128
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    Keywords

    network; hedge funds; Ivy league; information flows; insider trading;
    All these keywords.

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