If ever you have wondered why fund managers are so universally ordinary at their jobs – other than clinging to outmoded ideas such as the EMH and associated rationality concepts this might give you an idea.
We study data from an organization in which fund managers privately share investment ideas. Evidence suggests the investors in our sample have stock-picking skills. A strategy of going long (short) buy (sell) recommendations earns monthly calendar-time abnormal returns of 1.38% (-2.91%) over the January 1, 2000 to December 31, 2008 sample period. Interestingly, these skilled investors share their profitable ideas. We test predictions from private information sharing theories and determine that the managers in our sample share ideas to receive constructive feedback, gain access to a broader set of actionable ideas, and to attract additional arbitrager capital to their asset market.