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 possibility, 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.

We develop a novel measure of effort to revisit the fundamental questions of asset management: how does effort relate to incentives; and how does effort affect performance? Using unique observations of daily work activity, we define mutual fund manager effort by focusing on weekends. We find that managers facing competitive incentives exert more weekend effort. Focusing on within-advisor variation, we find that more effort follows outflows and increased volatility. Regarding future performance, more effort is followed by higher returns, especially for funds with competitive incentives, high active share, and low turnover. Finally, we use exogenous variation in effort due to weather conditions to demonstrate a causal link between effort and future returns.

We examine the implications of subtle bias against ethnically diverse managers in a global sample of 13,000 mutual fund managers, representing 105 different nationalities, and working across 30 countries. Using a sample of fund managers working in multiple teams simultaneously, and including manager by month fixed effects, we show that managers perform worse when working in teams with larger genetic distances between members. Performance is worse in teams where at least one armed conflict has been fought between the home country of team members. Ethnically diverse managers are 12% less likely to be promoted, and more likely to exit the industry when funds close. The effect on promotion and industry exit is larger in countries with higher levels of nationalism. Using OCED migration data to construct a shift-share instrument, and confirm our main result. Using national holidays and the FIFA World Cup to ‘prime’ nationalistic feelings, we show that communication between diverse teams deteriorates when nationalistic feelings are increased. We argue this is a possible driver of diverse team underperformance in our sample.