Talking Your Book: Evidence from Stock Pitches at Investment Conferences

Abstract

Using a novel dataset on investment conferences from 2008 to 2013, I show that hedge funds take advantage of the publicity of these conferences and strategically release their book information to drive market demand. Specifically, Hedge funds sell pitched stocks after the conferences to take profit and create room for better investment opportunities. However, pitched stocks still perform better than non-pitched stocks in the funds’ portfolios afterwards. Hedge funds do not pitch obviously bad stocks because maintaining a good reputation helps them raise more money. Pitched stocks earn a cumulative abnormal return of 20% over 18 months before the pitch and continue to outperform the benchmark by 7% over 9 months afterwards. Half the post-conference abnormal return reverts after another 9 months. Moreover, mutual funds exhibit opposite trading behaviors—selling before the pitches and buying afterwards—and possibly contribute to the post-pitch outperformance. Other hedge funds trade pitched stocks similarly to the funds that pitched, suggesting that they either run correlated strategies or share information with each other.

Keywords: Behavioral Finance, Hedge Funds/Mutual Funds