Abstract:We build an active asset management model to study the interplay between the career concerns of a manager and prevailing market conditions. We show that fund managers overinvest in market‐neutral strategies, as these have a reputational benefit. This benefit is smaller in bull markets, when investors expect more managers to use high‐beta strategies, making their performance less informative about their ability than in bear markets. Consequently, fund flows that follow high‐beta strategies are less responsive t… Show more
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