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Crowell Prize

Award-winning paper uses EDGAR IP data to track correlation to portfolio

A paper that linked performance with portfolio managers' EDGAR searches has won this year's Richard A. Crowell prize.

Huaizhi Chen, Lauren Cohen, Umit G. Gurun, Dong Lou and Christopher J. Malloy won the prize for their paper "IQ from IP: Simplifying Search in Portfolio Choice."

The prize, sponsored by PanAgora Asset Management, recognizes research that connects theory with application in the field of quantitative investment management.

The paper examines the behavior of individuals at institutional investment firms on the Securities and Exchange Commission's EDGAR servers from 2004 to 2015 and how their searches correlated with their investment decisions. It identifies that mutual fund managers' tracking activity has significant implications for their portfolio choices and subsequent performance.

Mr. Cohen, professor of business administration at Harvard Business School, said in a telephone interview that the paper came about as a result of deciphering the IP addresses of individuals downloading trading information of company insiders provided by the SEC via a Freedom of Information Act request. Through that, the authors were able to track what information individual portfolio managers at companies like Fidelity Investments and Vanguard Group Inc. are downloading. Among the information the authors found was very specific tracking behavior on the parts of those managers.

"They're more likely to track people they went to the same school with," Mr. Cohen said, "and they're more likely to track people that are close to them (geographically). And they're more likely to track senior officers and mimic those trades."

Mr. Cohen added that the persistence of managers' behaviors in downloading company insiders' trades improves performance.

Eric Sorensen, PanAgora's president and CEO, said in a news release announcing the award: "We believe this year's winning research makes a meaningful contribution to the science of economics and to the development of constructing optimal investment strategies. We are excited to recognize the authors' research and would like to congratulate all of our 2018 finalists."

Mr. Chen is an assistant professor at the University of Notre Dame's Mendoza School of Business (and former post-doctoral fellow at Harvard Business School at the time the paper was written); Mr. Gurun, professor of accounting and finance at University of Texas at Dallas; Mr. Lou, associate professor, department of finance at London School of Economics; and Mr. Malloy, professor of financial management at Harvard Business School.

The prize, which has been awarded annually since 2001, is named for Richard A. Crowell, PanAgora's founder and a pioneer in the field of quantitative investing.