Abstract: Alternative data has reshaped financial markets, yet it arises outside traditional disclosure channels, beyond market participants' control. We exploit Apple’s App Tracking Transparency as a privacy-driven shock to alternative data generation, revealing a previously overlooked vulnerability in financial markets. The policy weakens the predictive power of mobile traffic for firm performance and mutual fund trading. Funds reliant on such data lose their edge in exposed stocks, while analyst forecasts citing mobile traffic become less accurate and elicit weaker reactions. Firms more dependent on these market participants face greater information frictions.
Abstract: How does access to private loan information affect institutional investors’ equity returns? Exploiting mergers between asset managers and lenders as a plausibly exogenous shock to loan-side information access, I find that after gaining access institutional investors earn higher abnormal equity returns: within institutions, managers earn 3.1 pp higher annualized returns on stocks for which they have loan-side access than on their other holdings without such access, and across institutions trading the same stock, informed managers outperform equity-only peers by 1.7 pp annualized, consistent with debt positions conferring information unavailable to pure shareholders. Mechanism tests show larger gains when financial-reporting covenants bind; where such covenants exist pre-merger, returns rise by roughly 2 pp. Firms with dual holders adjust, public voluntary disclosures decline by about 11%, new facilities are 11–17% more likely to include information-intensive covenants, and loan pricing improves. Public markets respond with wider bid–ask spreads. By comparing holdings with loan-side access to managers’ other positions and to uninformed holders of the same stock, the design isolates causal loan-to-equity information flow, linking mergers between equity- and lending-side entities to trading rents and to shifts in the public information environment.
Discussant: Jason Kotter, Brigham Young University
Xintian Lin, Central University of Finance and Economics
Xin Yuan, Dongbei University of Finance and Economics
Abstract: Using a unique data set, we provide the first comprehensive evidence of trading before successful cyberattacks. Although only hackers should expect an imminent breach, short selling in victim firms intensifies a few weeks earlier—particularly when shares are widely lendable—whereas insider and institutional trades remain flat. Retail investors, ostensibly the least informed, likewise presciently divest/short soon-to-be-attacked stocks, coinciding with spikes in “+hacking” Google queries and rising trading/short costs. Post-cyberattack, victims earn negative returns—implying a wealth transfer vastly exceeding widely-publicized ransom demands. Therefore, cyberattacks—the tip of the iceberg of outsider-generated information, where private information production can be intertwined with real fundamental destruction—challenges the traditional paradigm of insider-centric information economics, where outsiders’ information acquisition is purely extractive—it never changes fundamentals.
