Do Hedge Funds Manipulate Stock Prices?
AbstractWe find evidence of significant price manipulation at the stock level by hedge funds on critical reporting dates. Stocks in the top quartile by hedge fund holdings exhibit abnormal returns of 30 basis points in the last day of the month and a reversal of 25 basis points in the following day. Using intraday data, we show that a significant part of the return is earned during the last minutes of the last day of the month, at an increasing rate towards the closing bell. This evidence is consistent with hedge funds' incentive to inflate their monthly performance by buying stocks that they hold in their portfolios. Higher manipulations occur with funds that have higher incentives to improve their ranking relative to their peers and a lower cost of doing so.
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Bibliographic InfoPaper provided by Ohio State University, Charles A. Dice Center for Research in Financial Economics in its series Working Paper Series with number 2011-5.
Date of creation: Feb 2011
Date of revision:
Other versions of this item:
- Ben-David, Itzhak & Franzoni, Francesco & Landier, Augustin & Moussawi, Rabih, 2011. "Do Hedge Funds Manipulate Stock Prices?," IDEI Working Papers 628, Institut d'Économie Industrielle (IDEI), Toulouse.
- Ben-David, Itzhak & Franzoni, Francesco & Landier, Augustin & Moussawi, Rabih, 2011. "Do Hedge Funds Manipulate Stock Prices?," TSE Working Papers 11-221, Toulouse School of Economics (TSE).
- NEP-ALL-2011-04-02 (All new papers)
- NEP-FMK-2011-04-02 (Financial Markets)
- NEP-MST-2011-04-02 (Market Microstructure)
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