The Early Bird Catches the Worm: How Lasting is the Value of New, Alternative Data?

Massimo Massa, Albert Mensah, Vicki Wei Tang and Prince Elvis Asamoah
Additional contact information
Massimo Massa: INSEAD - Institut Européen d'administration des Affaires
Albert Mensah: HEC Paris - Ecole des Hautes Etudes Commerciales
Vicki Wei Tang: GU - Georgetown University [Washington]
Prince Elvis Asamoah: CUHK - City University of Hong Kong [Hong Kong]

Working Papers from HAL

Abstract: We investigate how the information content of alternative data is impounded in prices and the duration of its value to mutual fund managers. Using a regression discontinuity design, we document that mutual funds increase their loadings on specific stocks by 0.7%-3% in response to exogenous, rounding-induced 1-percentage-point increase in ratings from customer-generated comments about companies' products and services on social media platforms. This effect is more pronounced when information asymmetry is greater. Funds relying more on such data yield higher abnormal future returns and exhibit better stock-picking and market-timing abilities. This effect dissipates when the data becomes public.

Keywords: alternative data; asset pricing; mutual funds (search for similar items in EconPapers)
Date: 2024-04-16
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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-04759208

DOI: 10.2139/ssrn.4788210

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