Using comprehensive quarterly data on hedge fund stock holdings, we study the role of hedge funds in the process of stock price formation. We find that hedge funds tend to hold undervalued stocks, and that both hedge fund ownership and their trades are positively related to the degree of stock...

Using hedge funds' holdings of IPO stocks, we find that stocks with abnormally high hedge fund holdings, based on stock and deal characteristics, yield abnormal returns. Moreover, hedge funds are able to sell IPO stocks in a timely fashion before long-run underperforming periods start,...

We provide evidence that open-end structures undermine asset managers' incentives to attack long-term mispricing. First, we compare open-end funds with closed-end funds. Closed-end funds purchase more underpriced stocks than open-end funds, especially if the stocks involve high arbitrage risk....

This paper studies the association between hedge fund activism and firm value, using matching procedures to mitigate the selection effects of which firms are chosen as targets by activist hedge funds. We find that targeted firms improve less in value (Q) subsequent to the start of activism than...

We examine whether mutual funds and hedge funds herd after each other and the associated impacts on stock prices. We find strong evidence that mutual funds herd into or out of stocks following the herd of hedge funds: mutual funds' herding measure is positively related to last quarter's hedge...

We develop a new framework to quantitatively trace the connection between valuations, expected returns, and characteristics back to the demands of institutional investors and households. The portfolio tilts of investors along environmental, social, and governance (ESG) measures, as well as...

Financial intermediaries play a key role in the formation of asset prices. More specifically, the increasing importance of non-bank financial intermediaries has raised new questions about the risks that hedge funds pose to the financial system. We focus on the role that changes in hedge fund...

Utilizing a dataset of 1,899 U.S. hedge funds, we present evidence of anti-herding behavior among hedge fund managers in the U.S. Hedge funds anti-herd primarily based on fundamental information and irrespective of market volatility and credit deterioration conditions although funding...