Abstract

http://ssrn.com/abstract=1345157
 
 

References (44)



 
 

Citations (1)



 


 



Skill, Luck and the Multiproduct Firm: Evidence from Hedge Funds


Rui J.P. De Figueiredo Jr.


University of California, Berkeley - Business & Public Policy Group

Evan Rawley


Columbia Business School - Management

October 18, 2010

Atlanta Competitive Advantage Conference Paper

Abstract:     
We propose that when managers require external investment to expand, higher skilled firms will be more likely to diversify, even though managers can exploit asymmetric information about their ability to raise capital from investors. We formalize this intuition in an equilibrium model and test our predictions using a large survivor-bias-free panel dataset on the hedge fund industry 1994-2006. We show that excess returns fall following diversification—defined as the launch of new fund—but are six basis points higher per month per unit of risk in diversified firms compared to a matched sample of focused firms. The evidence suggests that managers exploit asymmetric information about their own ability to time diversification decisions, but the discipline of markets ensures that better firms diversify on average. The results provide large sample empirical evidence that agency effects and firm capabilities both influence diversification decisions.

Number of Pages in PDF File: 45

Keywords: Diversification, reputation, performance, ability

JEL Classification: G23, L23, M21

working papers series


Download This Paper

Date posted: February 19, 2009 ; Last revised: October 1, 2012

Suggested Citation

de Figueiredo, Rui J.P. and Rawley, Evan, Skill, Luck and the Multiproduct Firm: Evidence from Hedge Funds (October 18, 2010). Atlanta Competitive Advantage Conference Paper. Available at SSRN: http://ssrn.com/abstract=1345157 or http://dx.doi.org/10.2139/ssrn.1345157

Contact Information

Rui José P. De Figueiredo Jr.
University of California, Berkeley - Business & Public Policy Group ( email )
545 Student Services Building
Berkeley, CA 94720
United States
510-642-6452 (Phone)
510-643-1412 (Fax)
Evan Rawley (Contact Author)
Columbia Business School - Management ( email )
3022 Broadway
New York, NY 10027
United States

Feedback to SSRN


Paper statistics
Abstract Views: 791
Downloads: 88
Download Rank: 169,265
References:  44
Citations:  1

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo3 in 0.359 seconds