Do Hedge Funds Profit From Public Information?
54 Pages Posted: 16 Mar 2018 Last revised: 10 Apr 2018
Date Written: March 30, 2018
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: Suggested Citation