Department of Finance
London School of Economics
London, WC2A 2AE
Tel: +44 (0)207 1075360
Institutional Affiliation: London School of Economics
NBER Working Papers and Publications
|July 2018||IQ from IP: Simplifying Search in Portfolio Choice|
with Huaizhi Chen, Lauren Cohen, Umit Gurun, Christopher Malloy: w24801
Using a novel database that tracks web traffic on the SEC’s EDGAR server between 2004 and 2015, we show that institutional investors gather information on a very particular subset of firms and insiders, and their surveillance is very persistent over time. This tracking behavior has powerful implications for their portfolio choice, and its information content. An institution that downloaded an insider-trading filing by a given firm last quarter increases its likelihood of downloading an insider-trading filing on the same firm by more than 41.3% this quarter. Moreover, the average tracked stock that an institution buys generates annualized alphas of over 12% relative to the purchase of an average non-tracked stock. We find that institutional managers tend to track members of the top manageme...
|September 2013||Playing Favorites: How Firms Prevent the Revelation of Bad News|
with Lauren Cohen, Christopher Malloy: w19429
We explore a subtle but important mechanism through which firms can control information flow to the markets. We find that firms that “cast” their conference calls by disproportionately calling on bullish analysts tend to underperform in the future. Firms that call on more favorable analysts experience more negative future earnings surprises and more future earnings restatements. A long-short portfolio that exploits this differential firm behavior earns abnormal returns of up to 149 basis points per month, or almost 18 percent per year. We find similar evidence in an international sample of earnings call transcripts from the UK, Canada, France, and Japan. Firms with higher discretionary accruals, firms that barely meet/exceed earnings expectations, and firms (and their executives) that are ...