Current Projects
Please refer to my curriculum vitae for details.
Information Advantage in a Global Economy: Geography, Social Networks and Hedge Fund Returns
Dissertation Committee: Mark Granovetter (Chair), Gi-wook Shin, Walter W. Powell
Everyone knows that well-connected firms and people gain an advantage in the global arena. Yet, academic research has only begun to look at the ties bridging far-flung locations. Extant research comes in three varieties: ethnographies of interpersonal ties, case studies of multinational corporations (MNCs), or models of international trade. Although these studies have revealed much about the way the global economy operates, three key questions remain largely unanswered. What do global interpersonal networks look like? How do MNCs weave the world into a cohesive whole? And most importantly, how do these global networks produce information advantage?
These questions motivate my dissertation, titled “Information Advantage in a Global Economy: Geography, Social Networks and Hedge Fund Returns”. My research looks at how the interplay between social networks and geographic space generates information advantages for well-connected actors. It not only describes how global networks affect the financial markets, but also lays a foundation for future research, such as the interplay between global networks and organizational structure, strategies for maximizing global network benefits and the relationship between social networks and financial crises.
Dissertation Research
My dissertation focuses on finance in general, and hedge funds in particular. Hedge funds play a key role in the financial markets, pushing and pulling “hot money” in and out of firms and countries. Hedge funds also exemplify professionalized service firms that have enormous clout in the global economy despite their small size.
Sociality and Investment Returns
Download a working paper based on these chapters.
The first part of my dissertation examines the social network linking hedge funds, and its impact on hedge funds’ investment returns.
The media portrays hedge fund managers as mathematical geniuses focused on computer algorithms. Yet, ethnographies show that these managers share insights and sensitive information with trusted competitors. My dissertation adds a quantitative dimension to these studies, linking hedge funds’ positions in social networks with their investment performance. Looking at a network of hedge funds and their key personnel, I find three social behaviors that affect hedge fund performance. Elite hedge funds are “clannish”, preferentially sharing information within mentorship-based lineages. Managers also “gossip” with former colleagues. Finally, hedge funds “imitate” elite competitors to improve their own performance. My findings suggest that imitators paradoxically tend to harm themselves, by systematically investing into bubbles. This research not only reveals the sociality of hedge funds, but also suggests that imitation facilitates manias and panics.
The Global Geography of Information Advantage
Download a working paper based on these chapters.
The second part of my dissertation introduces a geographic dimension. Here, I examine how global networks funnel specific types of information into specific geographic locations, before linking this information advantage with hedge fund performance.
Besides finance industry networks, hedge fund managers are also embedded into their geographic locations. Some locations provide timely, useful and accurate information because they are “industry clusters” or agglomerations. For instance, Wall Street’s traders and bankers generate a locally-concentrated pool of financial know-how. Such know-how may flow to a few other locations as well, via dense personal ties, personnel movement as well as MNC activities like the acquisition of foreign subsidiaries and patronage of geographically-distant service providers.
I begin by constructing a worldwide map of MNC-driven connections, theorizing how this network funnels specific types of information into specific geographic locations, and investigating how different locations generate different types of information advantage. Then, I link each type of information advantage with a specific hedge fund investment strategy by examining how investment performance varies across geographic space. It follows that hedge funds should maximize performance by choosing geographic locations matching their investment strategy. However, I find that hedge fund managers often choose geographic locations according to their social needs, not economic ones.
Extensions of Dissertation Research
My dissertation raises as many questions as it answers. How can hedge funds maximize their access to global information flows by adopting specific organizational structures? Are my findings generalizable to other organizational populations? How can MNCs and governments maximize their information advantage? Finally, what are the unintended consequences of global connectivity, especially during financial crises? To answer these questions, I will conduct three additional research projects.
My dissertation shows that social networks funnel investment-relevant information into specific locations. I would like to add depth to this statistical finding, by examining how the interplay between outside information and internal organizational structure affects investment performance. I will begin by identifying those funds that outperform the benchmark predicted by my dissertation’s statistical models. Then, I will conduct case studies of these exceptional hedge funds, to identify what makes them successful. This research will help us understand how global financial entities should be managed.
Second, I will investigate how countries can improve their information advantage by building global connections. My dissertation implies that skilled expatriates bring “social capital” (i.e. professional and social networks) to their host countries, in addition to their “human capital” (i.e. skills and talents). During my postdoctoral year at the Shorenstein Asia-Pacific Research Center at Stanford University, I will write a book manuscript studying whether South Korea could improve its global connectivity by recruiting expatriate labor. The Korean case is interesting because Korea is seeking to reduce its dependence on a rising China by building global connections.
Third, I will examine one unintended consequence of global hedge fund networks: the amplification of financial crises. Financial economics has traditionally studied financial markets using quantitative models that sometimes break down during financial manias and crises. Thus, economists have borrowed extensively from psychology in recent years. Given the success of this approach, some economists have called for a similar exchange with the social networks literature. I will contribute to this exchange by building on my dissertation, which suggests that social networks played a key role in differentiating the winners and losers of the 2007 financial crisis.
Policy Networks, Think Tanks and Implications for Democratic Governance
Besides my dissertation-related research, I am also researching policy networks centered on U.S. think tanks. These organizations link the business, nonprofit and policy spheres, creating “competitive advantages” for politicians, corporations and nonprofit foundations alike. Yet, academic research had yet to map these ties and describe their effects. I am constructing such a map, leveraging social network analysis to engage popular debates and answer key theoretical questions.
My extant research focuses on the “vast conspiracies” said to be influencing U.S. policy. Liberal commentators have long discussed a “vast right-wing conspiracy” of conservative donors and think tanks. Conservatives have recently talked about a countervailing liberal effort. Do these “conspiracies” exist? If so, how? And do they actually matter? To answer these questions, I conducted a network analysis of charitable foundations and think tanks. I found that the same conservative donors fund the same conservative think tanks, building stronger inter-organizational ties between these think tanks. Such ties meld conservatives into a cohesive ideological coalition. I also found that a similar coalition may be emerging amongst liberals, led by donors making strategic “investments”.
I will extend this research in two directions. First, I will investigate how these coalitions influence U.S. policy. Think tanks have proposed a multitude of initiatives ranging from financial reform to the Iraq War. I will examine how policy coalitions championed specific policy initiatives. Second, I will investigate the “revolving door” bringing executives and financiers into the U.S. government. Wealthy donors often sit on think tanks’ governing boards. There, they meet policymakers forced out of office when their party lost the White House. When these policymakers re-enter government, they tend to bring former donors with them. My future research would show how think tanks bridge largely-disconnected networks in politics, business and finance.
Download my 2007 project proposal to the Stanford Center on Philanthropy and Civil Society
Political Networks in South Korean National Assembly
I am also finishing up my research on the Korean National Assembly. Over the past five years, I have participated in a group at the Korean Studies Program at Stanford that has worked with various government agencies and media sources to assemble three types of data on the Korean National Assembly and its membership. The first category consists of assembly member biographies - educational backgrounds, personal relationships and work histories. The second describes the districts and elections voting them into office. A third type describes assembly member committee memberships and voting patterns once in office.
Much of this data has proven suitable for social network analysis. Working with Professor Gi-wook Shin and Dr. Myung-koo Kang, I have analyzed the internal social structures of Korean political parties during the so-called 3 Kims Era (1987-1997), and investigated their effects on key party post occupancy (e.g. the party secretary and floor leader positions).
The rich data we have collected has also enabled us to investigate why incumbent advantage in the Assembly is so much less pronounced than incumbent advantage in the United States Congress and the Japanese Diet, as well as the evolution of Korean politics through democratic transition.
Past Projects
The Paradox of Korean Globalization
Many globalization scholars consider nationalism and globalism contradictory cultural tendencies. Although this framework explains many empirical situations, it fails to explain many cases where nationalism and globalism mutually reinforce each other. Working with Professor Gi-wook Shin, I have constructed a theoretical explanation for this scenario, and tested it using quantitative data from the South Korean case.