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Do Hedge Funds Manipulate Stock Prices?

  • Itzhak Ben-David

    (Ohio State University)

  • Francesco A. Franzoni

    (University of Lugano and Swiss Finance Institute)

  • Augustin Landier

    (Toulouse School of Economics)

  • Rabih Moussawi

    (University of Pennsylvania - The Wharton School)

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.

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Paper provided by Swiss Finance Institute in its series Swiss Finance Institute Research Paper Series with number 11-53.

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Length: 47 pages
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Handle: RePEc:chf:rpseri:rp1153
Contact details of provider: Web page: http://www.SwissFinanceInstitute.ch
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