USC Price School of Public Policy

Event Details

Lusk Center for Real Estate Research Seminar: Simplifying Search in Portfolio Choice

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Lewis Hall (RGL) (Map)
308

USC Lusk Center for Real Estate Research Seminar Series

 

“IQ from IP: Simplifying Search in Portfolio Choice”

 

Presenter:

Chris Malloy

Harvard University

 

Abstract:

Using a novel database that tracks web traffic on the SEC's EDGAR servers between 2003 and 2016, we show that mutual funds exert effort to reduce the dimensionality of their portfolio selection problem. Specifically, we show that mutual fund managers' gather information on a very particular subset of firms and insiders, and their surveillance stays largely unchanged over time. This tracking has powerful implications for their portfolio choice, and its information content.

 

An institution that downloaded an insider-trading filling 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, which is 8 times larger than the unconditional probability of an institution downloading at least one insider trading filing in a quarter from any firm in her existing portfolio (4.8%). Moreover, the average tracked stock that an institution sells generates 7.5% annualized DGTW adjusted alpha, whereas the sale of an average non-tracked stock has close to zero DGTW adjusted alpha. The outperformance of tracked trades continues for a number of quarters following the tracked insider/institution sale and does not reverse within the sample period. Collectively, these results suggest that the information in tracked trades is important for fundamental firm value, and is only revealed following the information-rich dual trading by insiders and linked institutions.

 

Friday, December 8, 2017

12:00 – 1:30 p.m.

RGL 308 (Ralph and Goldy Lewis Hall)

 

To RSVP, please contact Nina Tibayan at: tibayan@price.usc.edu