Public and Private Information: Complements or Substitutes?

59 Pages Posted: 16 Mar 2018 Last revised: 10 Aug 2020

See all articles by Alan D. Crane

Alan D. Crane

Rice University - Jesse H. Jones Graduate School of Business

Kevin Crotty

Rice University - Jesse H. Jones Graduate School of Business

Tarik Umar

Rice University

Date Written: August 7, 2020

Abstract

Public information is widely viewed as a way to level the playing field among investors. We provide evidence that is inconsistent with this notion; public information can make private signals more valuable. Hedge funds acquiring public information subsequently earn 1.5%-higher annualized abnormal returns than non-acquirors. Acquisition forecasts news and its value-relevance, suggesting that public information complements private signals. The positive relation between public information acquisition and fund performance is not explained by information processing skill, time-varying effort, or other differences in fund ability. Our results inform theories that make assumptions on the relation between public and private signals.

Keywords: Information Acquisition, Public Information, Hedge Funds

JEL Classification: G11, G14, G23

Suggested Citation

Crane, Alan D. and Crotty, Kevin and Umar, Tarik, Public and Private Information: Complements or Substitutes? (August 7, 2020). 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 - Jesse H. Jones Graduate School of Business ( 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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