March 2017

Information in Financial Markets: Who Gets It First?

Nathan Swem


I compare the timing of information acquisition among institutional investors and sell-side analysts, and I show that hedge fund trades predict the direction of subsequent analyst ratings change reports while other investors' trades do not. In addition, hedge funds reverse trades after analyst reports, while other investors follow the analysts. Finally, I show that hedge funds perform best among stocks with high analyst coverage. These results suggest that hedge funds have superior information acquisition skills, and that analysts assist hedge funds in exploiting information acquisition advantages. These dynamics illustrate how hedge funds play an important role in information generation.

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Keywords: Analysts, Hedge Funds, Information, Mutual Funds


PDF: Full Paper

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Last Update: January 09, 2020