Essays on idea sharing and investor performance

Abstract

[ACCESS RESTRICTED TO THE UNIVERSITY OF MISSOURI AT AUTHOR'S REQUEST.] This dissertation is the study of a novel database from an exclusive and confidential website where a select group of fundamentals-based hedge fund managers privately share investment ideas. I find that the managers' long investment recommendations exhibit economically and statistically significant long-term abnormal returns. This result is unexpected in a world where there is an efficient market for fund managers and asset prices. I also find that these managers appear to introduce valuable private information to the market and the sharing of their ideas positively contributes to the price discovery process. I examine the implications of this idea-sharing arrangement and find that the effects of idea sharing go beyond the abnormal returns to the individual managers. Specifically, idea sharing impacts institutional ownership, the tendency of institutional investors to herd, and may also impact trading by insiders.