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Comment by chrisabrams | Hacker News Reader

In other news, students who study the most for SATs will post the best scores.

No, this is surprising because the only research they measured is accessing SEC filings from the government’s website. Since this is the definition of public information, in an efficient market there should be no comparative advantage to having it because every manager should already be using it.

The market isn't efficient. But more importantly, SEC filings are not the only data these firms use. It's just one source for which these researchers were able to capture access information.

Comparatively speaking, the SEC filings are just a blip next the rest of the data gathered by quantitative funds. Any conclusion that could be drawn from what's contained in this report would be hopelessly misleading.

> in an efficient market there should be no comparative advantage to having it because every manager should already be using it.

But they measured which managers actually do and do not use it, so that assumption already does not hold.

Assuming I understand what you are saying correctly, only surprise would be that managers don't actually make efficient use of public information.

Agreed. In addition:

"As discussed in the introduction, public information may be profitable if sophisticated investors like hedge funds are skilled information processors. Alternatively, private information may be more valuable when used in conjunction with public information." (pg. 19)

The paper goes on to show evidence suggesting that the predominant channel is the latter complementary private information mechanism.

It does seem counterintuitive that publicly-available information does indeed generate alpha, but the real valuable insight here is that hedge funds are able to generate alpha from using public data synergistically with private data.

> It does seem counterintuitive that publicly-available information does indeed generate alpha, but the real valuable insight here is that hedge funds are able to generate alpha from using public data synergistically with private data.

Even more than that: the best funds can generate alpha by simply combining different sources of public data without necessarily using any nonpublic data.

There is a lot of debate between efficient and inefficient market theories. Most hedge funds would ascribe to the inefficient market theory and so it is not surprising they are eating up public data.

This doesn't run afoul of my understanding of the EMH. I would expect an equilibrium for the stock market to be when the amount of trading by well informed individuals is such that the marginal cost of another hour of research is equal to the marginal benefit of another hour of research. Not: when the marginal benefit of another hour of research is zero.

The headline is terrible. The salient point from the article is:

> By mapping hedge fund IP addresses to those accessing financial filings, the team identified information gathering by hedge funds such as Renaissance Technologies and AQR

What is interesting for me is that there is a possible correlation between people who mine more and more data - even from publicly available sources - and their returns.

Important to note that correlation is not causation

Also interesting to see that the SEC would give out IP address information of who accessed their filings.

If that IP data is from the SEC 4 filings than that is interesting to see Renaissance and Blackrock using the bulk of their downloads from that source.

BUMP Form 4 is insider trading disclosures per the original paper. That is even more interesting.

it's like this: if you were in a super performant class where everyone read all the teacher's material supposedly until they knew it perfectly, then you would expect that there would be no correlation between the number of times the public class into is read and performance, as you expect everyone to be really performant and read it enough times. You would expect that for such super performant students, the only relevant info would be what they get elsewhere, because that's less obvious than studying the class material, which everyone is expected to already know perfectly.

Turns out maybe the students aren't actually that good at knowing if they read the material sufficiently well, and you can get information about who will do better at the test just by looking at who looked at the class material the most.

The surprise is that the students are worse then we thought.

Yet another application of "Proper Planning/Preparation Prevents [Piss-]Poor Performance."

> In other news, students who study the most for SATs will post the best scores.

Does this actually reflect some experience of yours? It certainly contradicts the existing research on "test prep".

Suppose I studied for the SATs more than anyone by conjugating Japanese verbs for 16 hours a day. Would this help my scores? Surely the relevance of information is more important to investment returns than the quantity.

But that would actually be very surprising!

In Germany, the poor who collect the most bottles have something to eat in the evening (barely exaggerated).

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