Displaced by Big Data? Evidence from Active Fund Managers
110 Pages Posted: 2 Aug 2023 Last revised: 5 Nov 2024
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: Suggested Citation