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Do Hedge Funds Manipulate Stock Prices?Itzhak Ben-DavidOhio State University - Fisher College of Business, Finance Department Francesco A. FranzoniUniversity of Lugano; Swiss Finance Institute Augustin LandierToulouse School of Economics Rabih MoussawiUniversity of Pennsylvania - The Wharton School August 31, 2012 Journal of Finance, Forthcoming Charles A. Dice Center Working Paper No. 2011-005 Fisher College of Business Working Paper No. 2011-03-005 Swiss Finance Institute Research Paper No. 11-53 AFA 2013 San Diego Meetings Paper Abstract: 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.
Number of Pages in PDF File: 80 Keywords: Hedge fund, Manipulation, Stock, Reporting, Manager, Monthly returns, Competition, Inflation, Fraud, Performance reporting, Investors, Returns JEL Classification: G12, G14, G23, G24 Accepted Paper SeriesDate posted: February 17, 2011 ; Last revised: September 16, 2012Suggested CitationContact Information
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