4 ms·

No, this is surprising because the only research they measured is accessing SEC filings from the government’s website. Since this is the definition of public in

No, this is surprising because the only research they measured is accessing SEC filings from the government’s website. Since this is the definition of public information, in an efficient market there should be no comparative advantage to having it because every manager should already be using it.

dsacco 9y ago
The market isn't efficient. But more importantly, SEC filings are not the only data these firms use. It's just one source for which these researchers were able to capture access information. Comparatively speaking, the SEC filings are just a blip next the rest of the data gathered by quantitative funds. Any conclusion that could be drawn from what's contained in this report would be hopelessly misleading.
savanaly 9y ago
This doesn't run afoul of my understanding of the EMH. I would expect an equilibrium for the stock market to be when the amount of trading by well informed individuals is such that the marginal cost of another hour of research is equal to the marginal benefit of another hour of research. Not: when the marginal benefit of another hour of research is zero.
larrydag 9y ago
There is a lot of debate between efficient and inefficient market theories. Most hedge funds would ascribe to the inefficient market theory and so it is not surprising they are eating up public data.
jihoon796 9y ago
Agreed. In addition: "As discussed in the introduction, public information may be profitable if sophisticated investors like hedge funds are skilled information processors. Alternatively, private information may be more valuable when used in conjunction with public information." (pg. 19) The paper goes on to show evidence suggesting that the predominant channel is the latter complementary private information mechanism. It does seem counterintuitive that publicly-available information does indeed generate alpha, but the real valuable insight here is that hedge funds are able to generate alpha from using public data synergistically with private data.
- dsacco 9y ago
  > It does seem counterintuitive that publicly-available information does indeed generate alpha, but the real valuable insight here is that hedge funds are able to generate alpha from using public data synergistically with private data. Even more than that: the best funds can generate alpha by simply combining different sources of public data without necessarily using any nonpublic data.
vanderZwan 9y ago
> in an efficient market there should be no comparative advantage to having it because every manager should already be using it. But they measured which managers actually do and do not use it, so that assumption already does not hold. Assuming I understand what you are saying correctly, only surprise would be that managers don't actually make efficient use of public information.

dsacco 9y ago

The market isn't efficient. But more importantly, SEC filings are not the only data these firms use. It's just one source for which these researchers were able to capture access information. Comparatively speaking, the SEC filings are just a blip next the rest of the data gathered by quantitative funds. Any conclusion that could be drawn from what's contained in this report would be hopelessly misleading.

savanaly 9y ago

This doesn't run afoul of my understanding of the EMH. I would expect an equilibrium for the stock market to be when the amount of trading by well informed individuals is such that the marginal cost of another hour of research is equal to the marginal benefit of another hour of research. Not: when the marginal benefit of another hour of research is zero.

larrydag 9y ago

There is a lot of debate between efficient and inefficient market theories. Most hedge funds would ascribe to the inefficient market theory and so it is not surprising they are eating up public data.

jihoon796 9y ago

Agreed. In addition: "As discussed in the introduction, public information may be profitable if sophisticated investors like hedge funds are skilled information processors. Alternatively, private information may be more valuable when used in conjunction with public information." (pg. 19) The paper goes on to show evidence suggesting that the predominant channel is the latter complementary private information mechanism. It does seem counterintuitive that publicly-available information does indeed generate alpha, but the real valuable insight here is that hedge funds are able to generate alpha from using public data synergistically with private data.

dsacco 9y ago
> It does seem counterintuitive that publicly-available information does indeed generate alpha, but the real valuable insight here is that hedge funds are able to generate alpha from using public data synergistically with private data. Even more than that: the best funds can generate alpha by simply combining different sources of public data without necessarily using any nonpublic data.

vanderZwan 9y ago

> in an efficient market there should be no comparative advantage to having it because every manager should already be using it. But they measured which managers actually do and do not use it, so that assumption already does not hold. Assuming I understand what you are saying correctly, only surprise would be that managers don't actually make efficient use of public information.