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

Author

Listed:
  • Massa, Massimo

    (INSEAD)

  • Mensah, Albert

    (HEC Paris)

  • Tang, Vicki Wei

    (Georgetown University)

  • Asamoah, Prince Elvis

    (City University of Hong Kong)

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.

Suggested Citation

  • Massa, Massimo & Mensah, Albert & Tang, Vicki Wei & Asamoah, Prince Elvis, 2024. "The Early Bird Catches the Worm: How Lasting is the Value of New, Alternative Data?," HEC Research Papers Series 1518, HEC Paris.
    • Handle: RePEc:ebg:heccah:1518
    DOI: 10.2139/ssrn.4788210
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    More about this item

    Keywords

    alternative data; asset pricing; mutual funds;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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