Information in Financial Markets: Who Gets It First? (University of Texas at Austin)

October 2014

KEYWORDS: hedge funds, mutual funds, broker/dealer, Research


Nathan Swem

  • University of Texas at Austin


This paper examines the timing of information acquisition of hedge funds, mutual funds, and broker/dealer analysts. I find hedge fund trading anticipates analyst information, while mutual fund trading does not. Specifically, hedge fund net buying predicts more analyst upgrade reports in the next quarter, and predicts fewer downgrade reports. Secondly, I find hedge funds and mutual funds respond differently to analyst information: in the quarter following analyst reports hedge funds “defy” analyst recommendations, while mutual follow the analysts. Finally, I find hedge funds perform best among stocks with highest research coverage and institutional ownership. I relate these findings to information acquisition theory in settings where investors acquire information at different times.

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