Mutual Fund Bets on Market Power

76 Pages Posted: 18 Feb 2021

See all articles by Stefan Jaspersen

Stefan Jaspersen

University of Cologne - Centre for Financial Research (CFR); University of Cologne - Department of Finance

Date Written: February 10, 2021

Abstract

Taking a firm's competitive position into account benefits investors who are better at evaluating this qualitative information. I find that fund managers who overweight companies with market power outperform their peers. Placebo exercises and an exogenous shock to product market competition around the 9/11 terrorist attacks support this finding. Managers with larger bets on market power are more experienced and long-term oriented. They pursue more illiquid investment strategies, select superior innovators, and more actively avoid competition within their portfolio. My findings show how managers with a superior information production utilize hard-to-process information about industrial organization when picking stocks.

Keywords: Mutual fund performance, Information production, Qualitative information, Product market competition

JEL Classification: G11, G12, G14, G23, L11

Suggested Citation

Jaspersen, Stefan, Mutual Fund Bets on Market Power (February 10, 2021). Available at SSRN: https://ssrn.com/abstract=3783181 or http://dx.doi.org/10.2139/ssrn.3783181

Stefan Jaspersen (Contact Author)

University of Cologne - Centre for Financial Research (CFR) ( email )

Albertus-Magnus Platz
Cologne, 50923
Germany

University of Cologne - Department of Finance ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

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