Do Hedge Funds Profit From Public Information?

56 Pages Posted: 16 Mar 2018 Last revised: 24 May 2018

Alan D. Crane

Rice University - Jesse H. Jones Graduate School of Business

Kevin Crotty

Rice University

Tarik Umar

Rice University

Date Written: May 21, 2018

Abstract

We examine whether hedge funds profit from public information. Unique data on hedge funds' use of publicly-available SEC filings show funds accessing filings subsequently exhibit 1.5% higher annualized abnormal returns than non-users. Above-median users earn even higher returns. Usage of filings is not merely a proxy for differences in fund ability. Fund returns are systematically related to the returns of stocks whose filings are viewed, suggesting funds act on acquired information. We conduct multiple analyses to explore why public information acquisition is profitable. Results are most 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? (May 21, 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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