We study the relation between hedge fund equity holdings and measures of informational efficiency of stock prices derived from intraday transactions, as well as daily data. Our findings support the role of hedge funds as arbitrageurs who reduce mispricing in the market. Hedge funds invest in...

We measure misvaluation using the discounted residual income model. Confirming the findings in the literature, we show that there are significant returns on a misvaluation based long-short portfolio that buys under- and sells short overvalued shares. We define misvaluation spread as the...

This paper examines the causes and consequences of hedge fund investments in exchange traded funds (ETFs) using U.S. data from 1998 to 2018. The data indicate that transient hedge funds and quasi-indexer hedge funds are substantially more likely to invest in ETFs. Unexpected hedge fund inflows...

Hedge funds significantly reduced their equity holdings during the recent financial crisis. In 2008Q3-Q4, hedge funds sold about 29% of their aggregate portfolio. Redemptions and margin calls were the primary drivers of selloffs. Consistent with forced deleveraging, the selloffs took place in...

Using a unique data set that contains the complete ownership structure of the German stock market, we study the momentum and contrarian trading of different investor groups. Foreign investors and financial institutions, and especially mutual funds, are momentum traders, whereas private...

Using a unique data set that contains the complete ownership structure of the German stock market, we study the momentum and contrarian trading of different investor groups. Foreign investors and financial institutions, and especially mutual funds, are momentum traders, whereas private...

Recent models and the popular press suggest that large groups of hedge funds follow similar strategies resulting in crowded equity positions that destabilize markets. Inconsistent with this assertion, we find that hedge fund equity portfolios are remarkably independent. Moreover, when hedge...

We examine the role of strategic communication in public short selling campaigns by hedge funds. Such campaigns are associated with abnormal returns for targets of approximately -7% as well as changes in the behavior of stakeholders (e.g., other short sellers). The effects are driven by...