Price Adjustment After Buffett's Holdings Disclosures

Hughes, Liu and Zhang study Berkshire’s holdings disclosures from 1980 to 2006 and find that prices continue adjusting afterward. Their historical evidence makes copying returns and the incorporation of public information into prices testable questions.

Source dates and applicability

This review uses the working paper dated July 5, 2010 and holdings from 1980–2006. As of October 2026, its findings describe historical reactions to disclosures. They do not establish a current copying opportunity; this article does not test later data or changes in information dissemination and market participation.

The paper also observes some professional investors trading in the opposite direction after Berkshire disclosed an increase in a holding. The authors consider overconfidence as one explanation, while the observed behavior does not describe every institution.

1. What the Paper Studies

The authors examine Berkshire’s 13F holdings disclosures, covering roughly 1980 through 2006, and do two main things:

1. Construct copycat portfolios: simulate following the disclosed holdings to see whether doing so is profitable.
2. Conduct event studies: examine the market’s immediate response to disclosure and its behavior over the following months.

2. The Finding: Remarkably Slow Market Reactions

Stock prices do rise a little at disclosure, but the adjustment is far from complete.

More importantly, prices continue to drift after disclosure. Even investors who follow with a delay may see prices keep rising.

The market does not immediately absorb all the information in Buffett’s purchases. That information may instead be reflected in prices gradually over the following period.

3. A More Striking Pattern: How Professionals Respond

The paper documents a notable pattern: when disclosures show that Berkshire has increased its stakes in certain stocks, some professional investors move in the opposite direction:

1. Institutional ownership actually declines, suggesting selling.
2. Analyst recommendations deteriorate, suggesting downgrades or a more pessimistic outlook.

The authors suggest that this may relate to overconfidence and to underestimating the importance of public information. Many professionals put greater faith in their own judgment, leading them to react slowly to changes in Buffett’s holdings or even trade against them.

Consequently, the information continues to be incorporated into prices gradually after disclosure.

4. References

1. John S. Hughes, Jing Liu, and Mingshan Zhang (2010), Overconfidence, Under-Reaction, and Warren Buffett’s Investments, working paper dated July 5, 2010, SSRN 1635061; DOI. The abstract directly supports the 1980–2006 disclosure-following results, market underreaction, analyst downgrades, and institutional selling. Overconfidence is the authors’ proposed explanation, not evidence that all professional investors behave this way. The cited source is a working paper, rather than a verified journal publication.