Abstract

http://ssrn.com/abstract=1707181
 
 

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Capitalizing on Capitol Hill: Informed Trading by Hedge Fund Managers


Meng Gao


University of Illinois at Urbana-Champaign - Department of Finance

Jiekun Huang


University of Illinois at Urbana-Champaign - Department of Finance

November 10, 2015

AFA 2012 Chicago Meetings Paper
Fifth Singapore International Conference on Finance 2011
Journal of Financial Economics (JFE), Forthcoming

Abstract:     
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 outperform passive benchmarks by 56 to 93 basis points per month on their political holdings when they are connected to lobbyists. Furthermore, the political outperformance of connected funds decreased significantly after the STOCK Act became effective. Our study provides evidence on the transmission of private political information in financial markets and on the value of such information to financial market participants.

Number of Pages in PDF File: 55

Keywords: Hedge funds, lobbyists, informed trading, performance, information transfer

JEL Classification: G11, G23, G14


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Date posted: November 13, 2010 ; Last revised: November 11, 2015

Suggested Citation

Gao, Meng and Huang, Jiekun, Capitalizing on Capitol Hill: Informed Trading by Hedge Fund Managers (November 10, 2015). Fifth Singapore International Conference on Finance 2011 ; AFA 2012 Chicago Meetings Paper; Fifth Singapore International Conference on Finance 2011 ; Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: http://ssrn.com/abstract=1707181 or http://dx.doi.org/10.2139/ssrn.1707181

Contact Information

Meng Gao
University of Illinois at Urbana-Champaign - Department of Finance ( email )
1206 South Sixth Street
Champaign, IL 61820
United States
Jiekun Huang (Contact Author)
University of Illinois at Urbana-Champaign - Department of Finance ( email )
1206 South Sixth Street
Champaign, IL 61820
United States
HOME PAGE: http://www.huangjk.info
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