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Displaced by Big Data: Evidence from Active Fund Managers

Author

Listed:
  • Bonelli, Maxime

    (London Business School - Department of Finance)

  • Foucault, Thierry

    (HEC Paris)

Abstract

Big data allows active asset managers to find new trading signals but doing so requires new skills. Thus, it can reduce the ability of asset managers lacking these skills to produce superior returns. Consistent with this hypothesis, we find that the release of satellite imagery data tracking firms’ parking lots reduces active mutual funds’ stock picking abilities in stocks covered by this data. This decline is stronger for funds that are more likely to rely on traditional sources of expertise (e.g., specialized industry knowledge) to generate their signals, leading them to divest from covered stocks. These results suggest that big data has the potential to displace high-skill workers in finance.

Suggested Citation

  • Bonelli, Maxime & Foucault, Thierry, 2023. "Displaced by Big Data: Evidence from Active Fund Managers," HEC Research Papers Series 1491, HEC Paris.
    • Handle: RePEc:ebg:heccah:1491
    DOI: 10.2139/ssrn.4527672
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    More about this item

    Keywords

    Big data; active mutual funds; stock-picking skill; quantitative investment;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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