Why they share MichelPireu     | Business Day Wednesday, October 3, 2018
From Sarah Ponczek at Bloomberg:

Ever wonder why hedge fund managers are so willing to get up on a stage and tell the world about their best ideas? A new study suggests an answer: the ideas are getting old, and they need a spot to sell.

The research pertains to what is by now a familiar ritual. A few times a year, famous investors crowd a conference hall somewhere and publicly discuss the companies they like. What they leave out is that starting roughly then, they’re much more apt to sell the stock than load up on more.

Not that it’s a crime against humanity, exactly. Propelled by the buzz, pitched stocks tend to keep on rising after being mentioned on stage, sometimes for months, according to Patrick Luo, the Harvard doctoral student who published the study. But it does answer a question that has occasionally vexed outsiders: if the ideas are so good, why tell anyone?

“Hedge funds take advantage of the publicity of these conferences and strategically release their book information to drive market demand,” says Luo. “Specifically, hedge funds sell pitched stocks after the conferences to take profit and create room for better investment opportunities.”

Pitched stocks outperform the broader market before and after hedge fund managers announce their best ideas. Most of the outsized returns occur before the pitches, though, while the post-conference boost is likely driven by investors following the ideas.

“This suggests that the pitched stocks were their ‘best ideas’ but not likely any longer,” says Luo. “Returns of pitched stocks diverged from market immediately after the pitches—long pitches spike up and short pitches spike down. These results suggest that these investment conferences are closely followed by other investors and have high market impacts.”

Pitched stocks also tend to beat other stocks that funds hold but that don’t get name-checked in an on-stage presentation.
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