Are active fund managers collectors of private information or fast interpreters of public information?

David R. Gallagher*, Adrian Looi, Matt Pinnuck

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

9 Citations (Scopus)


Recent studies of fund manager performance find evidence of outperformance. However limited research exists as to whether such outperformance is because of privately collected information, or merely expedient interpretation of publicly released information. In this study, we examine the trade sequences of active Australian equity fund managers around earnings announcements to provide insights into the source of fund managers' superior information. We document an increased occurrence of buy-sell trade sequences around good-news earnings announcements. The evidence is consistent with fund managers having both private information about forthcoming good-news earnings announcements and being 'short-term profiteers'. We find no evidence that fund managers have private information about forthcoming bad-news earnings announcements. However, we do find an increase in the frequency of fund managers not trading before bad-news earnings announcements only to subsequently sell during announcements.

Original languageEnglish
Pages (from-to)635-662
Number of pages28
JournalAccounting and Finance
Issue number3
Publication statusPublished - Sep 2010
Externally publishedYes


  • Earnings announcements
  • Equity managers
  • Informed trading
  • Institutional trading
  • Interpreting
  • Short-term profiting


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