Better to stay apart: asset commonality, bipartite network centrality, and investment strategies

  • Andrea Flori
  • Fabrizio Lillo
  • Fabio Pammolli
  • Alessandro SpeltaEmail author
S.I.: Recent Developments in Financial Modeling and Risk Management


By exploiting a bipartite network representation of the relationships between mutual funds and portfolio holdings, we propose an indicator that we derive from the analysis of the network, labelled the Average Commonality Coefficient (ACC), which measures how frequently the assets in the fund portfolio are present in the portfolios of the other funds of the market. This indicator reflects the investment behavior of funds’ managers as a function of the popularity of the assets they held. We show that ACC provides useful information to discriminate between funds investing in niche markets and those investing in more popular assets. More importantly, we find that ACC is able to provide indication on the performance of the funds. In particular, we find that funds investing in less popular assets generally outperform those investing in more popular financial instruments, even when correcting for standard factors. Moreover, funds with a low ACC have been less affected by the 2007–2008 global financial crisis, likely because less exposed to fire sales spillovers.


Mutual funds Bipartite network Alpha persistence Horse-race portfolios Average commonality coefficient 

JEL Classification

G11 G23 C02 C6 



Authors acknowledge support from CNR PNR Project “CRISIS Lab”.


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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Department of Management, Economics and Industrial EngineeringPolitecnico di MilanoMilanItaly
  2. 2.Center for Analysis, Decisions, and Society (CADS) - Human TechnopoleMilanItaly
  3. 3.Department of MathematicsUniversità di BolognaBolognaItaly
  4. 4.Department of Economics and ManagementUniversity of PaviaPaviaItaly

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