We document novel facts about the term structure of institutional trading and performance using transaction-level data on professional fund managers. New stock purchases earn positive risk-adjusted returns that decay gradually over the subsequent twelve months, and managers continue to buy the same stock in small increments for as long as the alpha remains positive, with proportional intensity. Greater competition for information and more highly correlated signals are associated with more aggressive trading and lower alpha. Our findings confirm many predictions of informed trading models, but also pose some new challenges for the theoretical literature.
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