Justin Birru

The Ohio State University
Fisher College of Business
824 Fisher Hall
Columbus, OH 43210-1144

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Institutional Affiliation: Ohio State University

NBER Working Papers and Publications

June 2020The Performance of Hedge Fund Performance Fees
with Itzhak Ben-David, Andrea Rossi: w27454
We study the long-run outcomes associated with hedge funds' compensation structure. Over a 22-year period, the aggregate effective incentive fee rate is 2.5 times the average contractual rate (i.e., around 50% instead of 20%). Overall, investors collected 36 cents for every dollar earned on their invested capital (over a risk-free hurdle rate and before adjusting for any risk). In the cross-section of funds, there is a substantial disconnect between lifetime performance and incentive fees earned. These poor outcomes stem from the asymmetry of the performance contract, investors' return-chasing behavior, and underwater fund closures.
July 2019Are Analyst Trade Ideas Valuable?
with Sinan Gokkaya, Xi Liu, René M. Stulz: w26062
Using a novel database, we show that the stock-price impact of analyst trade ideas is at least as large as the impact of stock recommendation, target price, and earnings forecast changes, and that investors following trade ideas can earn significant abnormal returns. Trade ideas triggered by forthcoming firm catalyst events are more informative than ideas exploiting temporary mispricing. Institutional investors trade in the direction of trade ideas and commission-paying institutional clients do so earlier than non-clients. Analysts generating trade ideas are more established and are more likely to produce ideas for stocks with high dollar trading commissions in their coverage universe.
April 2016Uninformative Feedback and Risk Taking: Evidence from Retail Forex Trading
with Itzhak Ben-David, Viktor Prokopenya: w22146
We document evidence consistent with retail day traders in the Forex market attributing random success to their own skill and, as a consequence, increasing risk taking. Although past performance does not predict future success for these traders, traders increase trade sizes, trade size variability, and number of trades with gains, and less with losses. There is a large discontinuity in all of these trading variables around zero past week returns: e.g., traders increase their trade size dramatically following winning weeks, relative to losing weeks. The effects are stronger for novice traders, consistent with more intense “learning” in early trading periods.

Published: Itzhak Ben-David & Justin Birru & Viktor Prokopenya, 2018. "Uninformative Feedback and Risk Taking: Evidence from Retail Forex Trading*," Review of Finance, vol 22(6), pages 2009-2036.

March 2016Industry Familiarity and Trading: Evidence from the Personal Portfolios of Industry Insiders
with Itzhak Ben-David, Andrea Rossi: w22115
We study whether industry familiarity is an advantage in stock trading by exploring the trading patterns of industry insiders in their own personal portfolios. To do so, we identify accounts of industry insiders in a large dataset provided by a retail discount broker. We find that insiders trade firms from their own industry more frequently. Furthermore, they earn abnormal returns exclusively when trading own-industry stocks, especially obscure stocks (small, low analyst coverage, high volatility). In a battery of tests, we find no evidence of the use of private information. The results are most consistent with the interpretation that industry familiarity is an advantage in stock trading.

Published: Itzhak Ben-David & Justin Birru & Andrea Rossi, 2018. "Industry Familiarity and Trading: Evidence from the Personal Portfolios of Industry Insiders," Journal of Financial Economics, . citation courtesy of

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