Money See, Money Do: Quantifying the Tendency for a Manager in a Network to Copy and Originate Investment Ideas

This paper introduces novel procedures for measuring the spread of investment ideas across a network of investment managers by analyzing their quarterly portfolio data. Specifically, we examine managers with overlapping investment positions, which indicates shared investment philosophies and expertise. We want to determine whether these similar managers arrive at the same investments or whether some managers copy each other. To answer this question, we examine the proportional sizes of each investment, as well as entrances and exits from portfolio positions from the previous two and next two quarters. Using 13F data from September 1999 to June 2022, we compute quantitative measurements of following (copier score) and leading (original score) for all unique managers that focus on long-term investments and maintain concentrated portfolios. Our results show preliminary evidence of a small number of firms that mimic other firms, as indicated by their average copier and original scores. Moreover, a more detailed analysis of the copier and original scores of all pairs of managers reveals stronger evidence of distinct copying and following. These findings shed light on how investment ideas diffuse in the financial system and offer insights into investment strategies for both individual and institutional investors. However, our study has limitations, as 13F data only reports public US equities, and we do not link our findings to manager performance. Therefore, future work may involve investigating performance, using more comprehensive data, and developing predictive linear models. This paper contributes to the literature on the transmission of investment ideas and provides a starting point for further research.