Do Hedge Funds Profit From Public Information?

54 Pages Posted: 16 Mar 2018 Last revised: 10 Apr 2018

Alan D. Crane

Rice University - Jesse H. Jones Graduate School of Business

Kevin Crotty

Rice University

Tarik Umar

Rice University

Date Written: March 30, 2018

Abstract

We examine whether hedge funds profit from public information. Using unique data on hedge funds' use of publicly-available SEC filings, we show that funds accessing filings in a month exhibit 1.5% higher annualized abnormal returns than non-users. Above-median users earn even higher returns. The effect is not due to fund-type differences. Performance declines with file complexity and increases with file uncertainty and competing hedge-fund views. Information processors (robotic downloaders and financial statement analysis specialists) exhibit weaker usage-return relations. Our results are less consistent with profitability resulting from information processing and more consistent with funds using public information to complement private signals.

Keywords: Hedge Fund, Information Acquisition, EDGAR, Public Information, Performance, Disclosure

JEL Classification: G11, G14, G23

Suggested Citation

Crane, Alan D. and Crotty, Kevin and Umar, Tarik, Do Hedge Funds Profit From Public Information? (March 30, 2018). Available at SSRN: https://ssrn.com/abstract=3127825 or http://dx.doi.org/10.2139/ssrn.3127825

Alan D. Crane

Rice University - Jesse H. Jones Graduate School of Business ( email )

6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
United States

Kevin Crotty (Contact Author)

Rice University ( email )

6100 Main Street
Houston, TX 77005-1892
United States

Tarik Umar

Rice University ( email )

Houston, TX
United States

HOME PAGE: http://https://business.rice.edu/person/tarik-umar

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