A couple of weeks ago I blogged about IntellectSpace, a new entry in the "people data /six degrees of separation" arena. Sandro Gevlesiani, one of the firm's co-founders, sent me a link to this New York Times article over the weekend: Quantifying the Role of School Ties in Investing. The article covers a recently published National Bureau of Economic Research working paper called The Small World of Investing: Board Connections and Mutual Fund Returns by Lauren Cohen (Yale), Andrea Frazzini (University of Chicago) and Christopher Malloy (London Business School). From the Times article:
Mutual fund managers invest more money in companies that are run by people with whom they went to college or graduate school than in companies where they have no such connections, the study found. The investments involving school ties, on average, also do significantly better than other investments.
The authors of the study offer two possible explanations — one benign and one decidedly not. Fund managers may simply know more about their old classmates, including which ones are likely to make good executives. The alternate explanation is that those executives may be passing along inside information to the fund managers.
While the paper is an extremely interesting example of "investigative economics," from an information industry perspective it reveals yet another case of the value of social networks/people data and the never-ending amount of data waiting to mined.
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