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Mutual Fund Bets on Market Power

Stefan Jaspersen

No 16-07, CFR Working Papers from University of Cologne, Centre for Financial Research (CFR)

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 (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 G23 L11 (search for similar items in EconPapers)
Date: 2021, Revised 2021
New Economics Papers: this item is included in nep-bec and nep-com
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfrwps:1607

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