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Market-Based Solutions to Vital Economic Issues


Kenan Institute 2024 Grand Challenge: Business Resilience
Market-Based Solutions to Vital Economic Issues
Sep 20, 2023

Mutual Fund Shorts and the Benefits of Acquiring Information


We study the performance and information acquisition behavior of mutual funds for both their long and short positions. We show that managers acquire relatively more information about their shorts because the benefit of acquiring information about shorts is larger. Mutual funds’ shorts also generate better returns than their longs. Moreover, with respect to short positions, performance and information acquisition are inversely related. Though surprising, we demonstrate that this finding aligns with standard theory as the inverse relation follows from managers acquiring less information about certain high performing short positions, the clear winners.

Note: Research papers posted on SSRN, including any findings, may differ from the final version chosen for publication in academic journals.  

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