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Do Hedge Funds Manipulate Stock Prices?
Author(s) -
BENDAVID ITZHAK,
FRANZONI FRANCESCO,
LANDIER AUGUSTIN,
MOUSSAWI RABIH
Publication year - 2013
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/jofi.12062
Subject(s) - hedge fund , stock (firearms) , incentive , quartile , monetary economics , business , open end fund , alternative beta , economics , financial economics , institutional investor , finance , corporate governance , statistics , microeconomics , mathematics , confidence interval , mechanical engineering , engineering
We provide evidence suggesting that some hedge funds manipulate stock prices on critical reporting dates. Stocks in the top quartile of hedge fund holdings exhibit abnormal returns of 0.30% on the last day of the quarter and a reversal of 0.25% on the following day. A significant part of the return is earned during the last minutes of trading. Analysis of intraday volume and order imbalance provides further evidence consistent with manipulation. These patterns are stronger for funds that have higher incentives to improve their ranking relative to their peers.