Media Coverage and Hedge Fund Returns

The authors classified news items about equity hedge funds over 1999–2008 into three source groups—general newspapers, specialized magazines, and corporate communications—and found that corporate-covered funds outperformed general-covered funds by about 11 percentage points annually. Investor fund flows, however, were not related to information sources, which suggests that the return spread is not fully understood by investors. The magnitude of this return spread reflects the extensive costs of processing information to generate alpha.