We study word-of-mouth effects on institutional investors through the interaction channel of alumni networks in China. After controlling for organization-based and location-based interpersonal connections, we find that mutual fund managers who graduated from the same college/university have more common stock holdings and are more likely to buy or sell the same stocks contemporaneously. As a result, alumni managers exhibit a higher correlation of fund returns. However, the influence of alumni relationship on mutual fund investments becomes weaker when more managers are connected within the network. We also find a positive and significant relation between alumni connection and fund performance. Our findings suggest that information dissemination among connected fund managers could be one of the driving forces for mutual fund herding behavior and that a portfolio of funds whose managers are educationally connected could be highly exposed to certain stocks and risks.
