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Hedge-fund managers that do the most research will post the best returns

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Re: Hedge-fund managers that do the most research will post the best returns

#31

Post by anonu »

chrisabrams wrote: post #16

In other news, students who study the most for SATs will post the best scores.

The headline is terrible. The salient point from the article is:

> By mapping hedge fund IP addresses to those accessing financial filings, the team identified information gathering by hedge funds such as Renaissance Technologies and AQR

What is interesting for me is that there is a possible correlation between people who mine more and more data - even from publicly available sources - and their returns.

Important to note that correlation is not causation

Also interesting to see that the SEC would give out IP address information of who accessed their filings.

Re: Hedge-fund managers that do the most research will post the best returns

#32

Post by calabin »

scarletham wrote: post #15
fwdpropaganda wrote: post #7

Earlier quoted context omitted.

Why would they do that?

Take this with a grain of salt as I don't work at any of the funds mentioned (but still in the industry), but why not? Filings are subject to change due to errors, updates, etc. It's cheaper, easier, and less error prone to just scrape and overwrite data than search for any updates. I may have been heavyhanded in saying that the firms are rescraping the entire universe of filings on a daily basis, but I guess my poin…

SEC EDGAR is terrible for a variety of reasons. It breaks, few things are truly standardized/normalized, etc. If you have the time and an invested interest there's no reason not to.

Filings are subject to change but they are restated, not modified in place. That said, anything goes on the site.

The only real reason not to scrape everything on a continuous loop is that there is a rate limiter in place, so you may end up impeding your intake of new data by loading yourself down with old jobs to handle.

Re: Hedge-fund managers that do the most research will post the best returns

#33

Post by wgerard »

Not surprised at all. Anecdote:

A friend and I used to run a website that tracked activist short sellers and their campaigns, and published all that information as a nice centralized database basically.

Hedge funds were, by far, the most interested in this - which was surprising to us, our original target audiences were auditors and legal firms. My impression from this experience is that the more successful hedge funds are just mass-ingesting data from everywhere they can, and somehow trying to make sense of it.

It's totally an arms race too: Once one of them is ingesting data from a new source, everyone else has to start doing it as well lest they fall behind. It was significantly easier to convince new clients once we had a few clients already (very much like the FOMO people speak about when fundraising).

Re: Hedge-fund managers that do the most research will post the best returns

#35

Post by savanaly »

jeremyjh wrote: post #22
chrisabrams wrote: post #16

In other news, students who study the most for SATs will post the best scores.

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.

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.

Re: Hedge-fund managers that do the most research will post the best returns

#37

Post by larrydag »

jeremyjh wrote: post #22
chrisabrams wrote: post #16

In other news, students who study the most for SATs will post the best scores.

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.

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.

Re: Hedge-fund managers that do the most research will post the best returns

#38

Post by jihoon796 »

jeremyjh wrote: post #22
chrisabrams wrote: post #16

In other news, students who study the most for SATs will post the best scores.

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.

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.

Re: Hedge-fund managers that do the most research will post the best returns

#39

Post by dsacco »

jihoon796 wrote: post #38
jeremyjh wrote: post #22

Earlier quoted context omitted.

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.

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 mechanis…

> 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.

Re: Hedge-fund managers that do the most research will post the best returns

#40

Post by vanderZwan »

> "The fact that public information acquisition relates to performance is surprising. SEC filings are the very definition of 'public' information, and therefore, usage of such information should not be profitable,"

Honest question: isn't that a contradiction in terms? Public information stands for "stuff that everyone is presumed to know", right? Like, economists using an assumption of "perfect knowledge of the market regarding public information" (or something like that, I'm obviously not an economist) as an approximation in their knowledge. But the fact that some managers do look this up, and some don't, means that this approximation does not hold. The premise of what is implied with "public knowledge" is undermined by the very thing being measured.

Assuming I understand this correctly, it looks to me like they essentially correct for the error caused by this assumption of perfect knowledge, which is the opposite of unexpected (but still a very neat finding!)

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