Values and Networks: Former Classmates invest in the Same Stocks

“Is College a Focal Point of Investor Life?” (free access) is an interesting article published in Review of Finance by Massimo Massa and Andrei Simonov, in which they analyze the link between college interaction and portfolio choice. The researchers consider both the general imprinting of values shared by all the students attending the same school—values-based interaction—and the ensuing interaction with the classmates—bonding-based interaction. They show that even after controlling for the standard motivations of portfolio theory, college-based interaction affects the choice of styles—growth/value investing as well as stock picking. Both dimensions of interaction—values-based and bonding-based interactions—contribute to shape the investor choice. Overall, college interaction significantly affects portfolio choice. Investors invest in the same stocks in which their former classmates do. Each individual college leaves a specific and distinct trace on his students.