Displaced by Big Data? Evidence from Active Fund Managers

110 Pages Posted: 2 Aug 2023 Last revised: 5 Nov 2024

See all articles by Maxime Bonelli

Maxime Bonelli

London Business School - Department of Finance

Thierry Foucault

HEC Paris - Finance Department

Date Written: August 1, 2023

Abstract

Alternative data provides new signals for active fund managers, but requires specific skills to leverage. Managers lacking these skills could experience a decline in their ability to outperform, unless their expertise produces information distinct from that in alternative data. Consistent with the former, we find that the release of satellite data tracking firms’ parking lots significantly reduces fund managers’ stock-picking abilities in covered stocks. This effect is stronger for funds leveraging traditional expertise, like industry specialization or geographic proximity, leading them to divest from covered stocks. Our findings suggest that alternative data can reshape the determinants of active funds’ performance.

Keywords: Big data, active mutual funds, stock-picking skill, quantitative investment

JEL Classification: G11, G14, G23

Suggested Citation

Bonelli, Maxime and Foucault, Thierry, Displaced by Big Data? Evidence from Active Fund Managers (August 1, 2023). HEC Paris Research Paper No. FIN-2023-1492, Available at SSRN: https://ssrn.com/abstract=4527672 or http://dx.doi.org/10.2139/ssrn.4527672

Maxime Bonelli (Contact Author)

London Business School - Department of Finance ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom

Thierry Foucault

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France
(33)139679569 (Phone)
(33)139677085 (Fax)

HOME PAGE: http://thierryfoucault.com/

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