Information in Financial Markets: Who Gets It First?

Abstract

I compare the timing of information acquisition among institutional investors and sell-side analysts. I find that hedge funds are unique: they anticipate analyst reports, and then reverse their positions after analysts publish reports. These trends are strongest for hedge funds and analysts most closely geographically situated. I also find that hedge funds generate their highest risk-adjusted returns among stocks with high analyst coverage. These results indicate that hedge funds are faster relative to analysts and other investors, and suggest that analysts assist hedge funds in exploiting their information acquisition advantages.

Keywords: Hedge Funds, Information, Analysts, Mutual Funds

JEL Classification: G14, G12, G11, G24, G20, G10