The Freedom of Information Act and the Race Towards Information Acquisition

54 Pages Posted: 1 Nov 2014 Last revised: 30 Apr 2015

See all articles by Antonio Gargano

Antonio Gargano

University of Melbourne - Department of Finance

Alberto Rossi

University of Maryland - Department of Finance

Russ Wermers

University of Maryland - Robert H. Smith School of Business

Date Written: October 30, 2014

Abstract

We document a little-known source of information exploited by sophisticated institutional investors: the Freedom of Information Act (FOIA), a law that allows for the disclosure of previously unreleased information by the U.S. Government. Through FOIA requests, we identify several sophisticated institutional investors, chiefly hedge funds, that request information from the FDA. We explore the type of information commonly requested by funds and the types of firms that are targets of FDA- FOIA requests, and we show that FOIA requests allow these investors to generate abnormal returns. Thus, we illustrate a detailed mechanism through which costly information becomes incorporated into market prices.

Keywords: Institutional Investors, Hedge Funds, Freedom of Information Act

JEL Classification: G14, G18, G23

Suggested Citation

Gargano, Antonio and Rossi, Alberto and Wermers, Russell R., The Freedom of Information Act and the Race Towards Information Acquisition (October 30, 2014). Robert H. Smith School Research Paper No. RHS 2517075; Finance Down Under 2015 Building on the Best from the Cellars of Finance Paper. Available at SSRN: https://ssrn.com/abstract=2517075 or http://dx.doi.org/10.2139/ssrn.2517075

Antonio Gargano

University of Melbourne - Department of Finance ( email )

Faculty of Economics and Commerce
Parkville, Victoria 3010 3010
Australia

Alberto Rossi (Contact Author)

University of Maryland - Department of Finance ( email )

Robert H. Smith School of Business
Van Munching Hall
College Park, MD 20742
United States

Russell R. Wermers

University of Maryland - Robert H. Smith School of Business ( email )

Department of Finance
College Park, MD 20742-1815
United States
301-405-0572 (Phone)
301-405-0359 (Fax)

HOME PAGE: http://www.rhsmith.umd.edu/finance/rwermers/

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