Recent studies have documented that institutional investors trade contrary to the predictions of the book-to market anomaly. We examine whether a prominent sub-group of institutional investors, namely hedge funds, differ from other institutions in terms of their trading behavior with respect to...

We find that strong disagreements between hedge funds and other institutions in their common stock trades are twice as likely as agreements. The overall success of hedge funds’ trades is confined to disagreement stocks. While hedge funds are on average positive feedback traders, albeit weaker...

This paper investigates the role of institutional trading in the emergence of hedge fund activism – an important corporate governance mechanism. We demonstrate that institutional sales raise a firm's probability of becoming an activist target. Further, by exploiting the funding circumstances...

This paper utilizes a rich literature on institutional investors' governance roles and develops simple measures of institutional discontent expressed through holding, trading and voice channels to predict hedge fund activism target selection. Discontent expressed through all three channels leads...

Using daily equity transactions, we create a hedge fund informed trading measure (ITM) that separates information related trades from liquidity driven trades. We find that stocks with higher hedge fund informed trading are associated with higher future stock performance. The long-short portfolio...

This paper examines the hypothesis that hedge fund managers gain an informational advantage in securities trading through their connections with lobbyists. Using datasets on the long-equity holdings and lobbyist connections of hedge funds from 1999 through 2012, we show that hedge funds...

Research in hedge fund investing proposes different solutions to build optimal hedge fund portfolios. However, these solutions are direct extensions of the usual meanvariance framework, and still suffer from model risks. More complex approaches start to be used but are related to numerous...

We examine the relative weights hedge fund investors attach to past information in the fund selection process. The weighting scheme appears inconsistent with the one of econometric forecast models that predict fund returns, alphas or Sharpe ratios. In particular, investor flows are highly...

We study the effect of share restrictions on the flow-performance relation of individual hedge funds. Consistent with the predictions of our model, hedge funds exhibit a convex flow-performance relation in the absence of share restrictions, similar to mutual funds. However, in the presence of...

To identify capacity constraints in hedge funds and simultaneously gauge how well-informed hedge fund investors are, we need measures of investor demand that do not affect deployed hedge fund assets. Using new data on investor interest from a secondary market for hedge funds, this paper verifies...