Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Thursday, January 12, 2017

Market power in the portfolio: Product market competition and mutual fund performance

Stephan Jaspersen discovers Market power in the portfolio: Product market competition and mutual fund performance.

ABSTRACT: I provide evidence that fund managers who overweight firms with the most differentiated products ('monopolies') exhibit a superior risk-adjusted performance. This is consistent with information advantages due to a better understanding of qualitative information on a firm's competitive environment. I find that funds with above median monopoly bets outperform by up to 92 basis points annually and trade more successfully in both their monopoly and nonmonopoly sub-portfolios. My identification strategy includes exogenous shocks to information quality using the Sarbanes-Oxley Act and to a firm's product market environment using the 9/11 terrorist attacks. I document that managers who place larger monopoly bets are less likely to invest into rival firms at the same time, have a longer investment horizon, and hold more illiquid and high quality stocks.

http://lawprofessors.typepad.com/antitrustprof_blog/2017/01/market-power-in-the-portfolio-product-market-competition-and-mutual-fund-performance.html

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