University of Notre Dame
238 Mendoza College of Business
Institutional Affiliation: Mendoza College of Business
NBER Working Papers and Publications
|July 2018||IQ from IP: Simplifying Search in Portfolio Choice|
with Lauren Cohen, Umit Gurun, Dong Lou, 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...