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Why Do Fund Managers Identify and Share Profitable Ideas?

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  • Crawford, Steven S.
  • Gray, Wesley R.
  • Kern, Andrew E.

Abstract

We study data from an organization in which fund managers privately share and discuss detailed investment recommendations. Buy recommendations generate positive abnormal returns, and sell recommendations result in negative abnormal returns. In the context of these results, we explore an important economic question: Why do skilled investors share profitable ideas with others? Evidence suggests that the managers in our sample share to receive feedback on their ideas and to attract additional arbitrageur capital to the securities they recommend in order to correct mispricings.

Suggested Citation

  • Crawford, Steven S. & Gray, Wesley R. & Kern, Andrew E., 2017. "Why Do Fund Managers Identify and Share Profitable Ideas?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 52(5), pages 1903-1926, October.
    • Handle: RePEc:cup:jfinqa:v:52:y:2017:i:05:p:1903-1926_00
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    Cited by:

    1. Ganglmair, Bernhard & Holcomb, Alex & Myung, Noah, 2020. "Expectations of reciprocity when competitors share information: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 170(C), pages 244-267.
    2. Li, Lu & Li, Yihang & Wang, Xueding & Xiao, Tusheng & Zhu, Hongjun, 2022. "Hedge fund networks, information dissemination, and stock price comovement: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 83(C).
    3. Tristan L. Botelho, 2018. "Here’s an Opportunity: Knowledge Sharing Among Competitors as a Response to Buy-in Uncertainty," Organization Science, INFORMS, vol. 29(6), pages 1033-1055, December.
    4. Gong, Xiao-Li & Liu, Jia, 2023. "Institutional investor information network, analyst forecasting and stock price crash risk," Research in International Business and Finance, Elsevier, vol. 65(C).
    5. Manuel Ammann & Nic Schaub, 2021. "Do Individual Investors Trade on Investment-Related Internet Postings?," Management Science, INFORMS, vol. 67(9), pages 5679-5702, September.
    6. André Betzer & Jan Philipp Harries, 2022. "How online discussion board activity affects stock trading: the case of GameStop," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 36(4), pages 443-472, December.
    7. Cujean, Julien, 2020. "Idea sharing and the performance of mutual funds," Journal of Financial Economics, Elsevier, vol. 135(1), pages 88-119.
    8. Lou, Youcheng & Yang, Yaqing, 2023. "Information linkages in a financial market with imperfect competition," Journal of Economic Dynamics and Control, Elsevier, vol. 150(C).

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