Learning by Consuming

Mutual fund managers increase investment allocations to companies manufacturing automobiles they have purchased. This effect is stronger (weaker) when these customer-managers have positive (negative) consumption experiences, as measured by repeat purchases (positive), brand switches, and swift resale after purchase (negative). Periods when customer-managers report positive holdings in companies manufacturing their automobiles are associated with higher subsequent stock returns compared to those when they report zero holdings. Customer-managers are also less responsive to analyst recommendations in adjusting their allocations and appear better able to evaluate automobile recall severity. These results suggest that managers gain value-relevant investible information from their consumption experiences