Hedge funds with media coverage underperform no-coverage funds by 3.5%/yr

http://www.bloomberg.com/apps/news?pid=20601039&sid=a0cTvxpUgRKM

by dsplittgerber • 16 years ago

2 2 16 years ago

Paper http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1563703

morisy• 16 years ago

Thanks for including the original link, dsplittgerber, because the actual article is rather misleading, attributing the underperformance to "vanity" via some ancient Rome anecdote without real evidence. He ignores the paper's own author's hypothesis:

"This hypothesis posits that in informationally incomplete markets, investors are not aware of all securities. As a consequence, stocks with lower investor recognition need to offer higher returns to compensate their holders for being imperfectly diversified. By disseminating information to a wide audience, media coverage broadens investor recognition. Thus, in equilibrium, stocks with intense media coverage earn a lower return than neglected stocks."

So, market forces, not hubris.

Hedge funds with media coverage underperform no-coverage funds by 3.5%/yr

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