Revealed Institutional Information Production and Anomaly Returns

70 Pages Posted: 22 Sep 2022 Last revised: 7 Feb 2024

See all articles by AJ Chen

AJ Chen

University of Southern California - Marshall School of Business

Gerard Hoberg

University of Southern California - Marshall School of Business - Finance and Business Economics Department

Miao Ben Zhang

University of Southern California - Marshall School of Business - Finance and Business Economics Department

Date Written: September 22, 2022

Abstract

We show that financial media reveals institutional investors’ information production about industries, which stimulates more production of fundamental information, increases institutional trading, and accelerates the correction of mispricing. Using over one million Wall Street Journal articles from 1979-2020, we create a new measure of revealed institutional information (InstPred). When InstPred is high, (i) value and momentum returns are 34% to 62% larger, (ii) institutional investors trade anomalies more, and (iii) information production via downloads of SEC filings increases. Our results are reinforced by quasi-exogenous variation in industries' investor-WSJ connections and cannot be explained by other informative measures including sentiment.

Keywords: Media, Crowd Sourcing, Anomaly, Value Premium, Momentum, WSJ, Institutional Investors

Suggested Citation

Chen, AJ and Hoberg, Gerard and Zhang, Miao Ben, Revealed Institutional Information Production and Anomaly Returns (September 22, 2022). USC Marshall School of Business Research Paper Sponsored by iORB, Available at SSRN: https://ssrn.com/abstract=4207132 or http://dx.doi.org/10.2139/ssrn.4207132

AJ Chen

University of Southern California - Marshall School of Business ( email )

Los Angeles, CA
United States

Gerard Hoberg (Contact Author)

University of Southern California - Marshall School of Business - Finance and Business Economics Department ( email )

Marshall School of Business
Los Angeles, CA 90089
United States

HOME PAGE: http://faculty.marshall.usc.edu/Gerard-Hoberg/

Miao Ben Zhang

University of Southern California - Marshall School of Business - Finance and Business Economics Department ( email )

Marshall School of Business
Los Angeles, CA 90089
United States

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

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