Transmission of Information from Private to Public Markets

57 Pages Posted: 9 Feb 2022 Last revised: 6 Sep 2022

See all articles by Shrijata Chattopadhyay

Shrijata Chattopadhyay

Purdue University

John J. McConnell

Purdue University

Timothy E. Trombley

Illinois State University

M. Deniz Yavuz

Purdue University - Krannert School of Management

Date Written: February 4, 2022

Abstract

We report evidence consistent with institutional investors using industry-level information that they obtain from their investments in venture capital (VC) funds to earn excess returns in publicly-traded equities. We use court rulings regarding the Freedom of Information Act as an exogenous shock affecting the information flow between VC firms and institutional investors to show that the excess returns are explained by information received via this channel. Thus, institutional investors serve as conduits of information, making publicly-traded stock prices more efficient and, in the process, earning higher returns from their VC investments than implied by the cash flows thereby received.

Keywords: Incorporation of information, stock prices, institutional investors, private equity, venture capital

JEL Classification: G11, G14, G23, G24

Suggested Citation

Chattopadhyay, Shrijata and McConnell, John J. and Trombley, Timothy E. and Yavuz, M. Deniz, Transmission of Information from Private to Public Markets (February 4, 2022). Available at SSRN: https://ssrn.com/abstract=4026253 or http://dx.doi.org/10.2139/ssrn.4026253

Shrijata Chattopadhyay (Contact Author)

Purdue University ( email )

West Lafayette, IN 47907-1310
United States
5129985363 (Phone)
47906 (Fax)

John J. McConnell

Purdue University ( email )

MGMT, KRAN
403 West State St.
West Lafayette, IN 47907-2056
United States
765-494-5910 (Phone)
765-494-7863 (Fax)

Timothy E. Trombley

Illinois State University ( email )

Normal, IL 61790
United States

HOME PAGE: http://www.timtrombley.com

M. Deniz Yavuz

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
217
Abstract Views
768
Rank
224,506
PlumX Metrics