The Freedom of Information Act and the Race Towards Information Acquisition

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: Suggested Citation

Gargano, Antonio and Rossi, Alberto G. 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