Do Hedge Funds Manipulate Stock Prices?
Charles A. Dice Center Working Paper No. 2011-005
80 Pages Posted: 17 Feb 2011 Last revised: 16 Sep 2012
Date Written: August 31, 2012
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.
Keywords: Hedge fund, Manipulation, Stock, Reporting, Manager, Monthly returns, Competition, Inflation, Fraud, Performance reporting, Investors, Returns
JEL Classification: G12, G14, G23, G24
Suggested Citation: Suggested Citation