Displaced by Big Data: Evidence from Active Fund Managers

Maxime Bonelli and Thierry Foucault
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Maxime Bonelli: London Business School - Department of Finance

No 1491, HEC Research Papers Series from 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.

Keywords: Big data; active mutual funds; stock-picking skill; quantitative investment (search for similar items in EconPapers)
JEL-codes: G11 G14 G23 (search for similar items in EconPapers)
Pages: 93 pages
Date: 2023-08-02
New Economics Papers: this item is included in nep-big
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1491

DOI: 10.2139/ssrn.4527672

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