Abstract
Using the Freedom of Information Act, hedge funds receive records from the Food and Drug Administration about new product approvals, factory inspections, and complaints. We use the funds' receipt of this information to empirically test implications of theories about investors with bounded rationality acquiring complex information for trading purposes. Consistent with theory, we find evidence that the magnitude of hedge fund trades is positively related to the funds' prior knowledge about the target firm and the FOIA process, and to the short-term abnormal stock returns derived from trading.
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