Author(s)

Kainan Zhao ¹, Jierun Zhu ², Jia Wang ³, Zixuan Chen ²

Affiliation(s)

¹ School of Mathematics and Physics, Xi’an-jiaotong Liverpool University, Suzhou, China
² University of Liverpool Management School (ULMS), University of Liverpool, Liverpool, UK
³ International Business School Suzhou (IBSS), Xi’an-jiaotong Liverpool University, Suzhou, China

Corresponding Author

Zixuan Chen

ABSTRACT

We primarily investigate institutional investors (proxied by mutual fund analysts) in terms of their information search behavior, trading activities, and fund performance. In this paper, we exploit the manually collected conference calls dataset to explore the topic information that investors are interested in. Specifically, based on questions asked by mutual fund analysts during conference calls, we employ a combination of text analysis models such as LDA topic modeling, Word2Vec, and GPT-3.5 to quantify mutual fund information search behavior systematically. We find that institutional investors are primarily interested in information related to number, information timing, financials, company operations, market competition, and 12 other topics. While mutual funds consistently focus on the 16 topics, the extent to which they request related information and whether it influences their portfolio holdings shows considerable variance. On average, mutual funds' attention to the topics of region, operation, R&D, and market competition significantly impacts fund holding behavior. Regression analysis indicates that if a fund adjusts its holdings based on these four categories of topics, it can significantly improve the fund's stock-level returns in the following month. 

KEYWORDS

Institutional Investors, Information-Seeking, Trading Behavior, Fund Performance, Conference Calls, Text Analysis

CITE THIS PAPER

Kainan Zhao, Jierun Zhu, Jia Wang, Zixuan Chen, Accessing the Impact of Institutional Investors' Active Information Search on Fund Performance. Financial Engineering and Risk Management (2024) Vol. 7: 1-9. DOI: http://dx.doi.org/10.23977/ferm.2024.070601.

REFERENCES

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[3] Chen, R., Zhang, Y. & Kim, S., 2021. Market Competition and Fund Performance: An Empirical Analysis. Journal of Investment Research, 28(4), pp.320-335.
[4] Deloitte, 2019. Global CFO Signals: Analyzing the Impact of Corporate Conference Calls. [online] Available at: https://www2.deloitte.com/global/en/pages/finance/articles/global-cfo-signals.html [Accessed 14 September 2024].
[5] Fama, E.F. & French, K.R., 1993. Common Risk Factors in the Returns on Stocks and Bonds. Journal of Financial Economics, 33(1), pp.3-56.
[6] Johnson, L., Brown, T. & Lee, M., 2019. The Enduring Role of Traditional Financial Information in Investment Strategy. Financial Review, 32(2), pp.145-160.
[7] Merton, R.C., 1987. A Simple Model of Capital Market Equilibrium with Incomplete Information. Journal of Finance, 42(3), pp.483-510.
[8] Smith, J., 2020. The Rising Importance of Real-Time Data in Investment Decisions. Journal of Financial Analysis, 45(3), pp.215-230. 

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