The Value of Activism: A Hedge Fund Investor's Perspective

50 Pages Posted: 12 May 2018 Last revised: 6 Sep 2018

Felix Zhiyu Feng

University of Notre Dame

Chengdong Yin

Purdue University - Krannert School of Management

Caroline Zhu

University of Oklahoma

Date Written: September 1, 2018


This study offers fresh insight into the value of hedge fund activism from the perspective of activist hedge funds’ own investors. Using a novel and comprehensive dataset, we compare the returns from activism target firms to the returns the same activist hedge fund generates from its non-activism equity investments. Overall, targets do not perform differently from non-targets within the same fund. Outperformance is observed, however, in the first three months of intervention and in particular when the activist hedge fund has had prior intervention experience or is more familiar with the target firm’s industry. At the same time, the contribution of targets to the overall performance of the activist hedge fund is significantly smaller than the contribution of non-targets, suggesting that activist hedge funds underinvest in activism. The outperformance of and underinvestment in targets are mostly seen in the period before the recent financial crisis. Inflows of capital into activist hedge funds lead to the acquisition of new targets, while outflows lead to the cutting back of existing target positions and the allocation of equity portfolio toward activism.

Keywords: hedge fund, shareholder activism, portfolio analysis

JEL Classification: G23, G11, G14

Suggested Citation

Feng, Zhiyu and Yin, Chengdong and Zhu, Caroline, The Value of Activism: A Hedge Fund Investor's Perspective (September 1, 2018). Available at SSRN: or

Zhiyu Feng (Contact Author)

University of Notre Dame ( email )

3079 Jenkins-Nanovic
Notre Dame, IN 46556
United States
(574)631-0428 (Phone)


Chengdong Yin

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

Caroline Zhu

University of Oklahoma ( email )

307 W Brooks
Norman, OK 73019
United States

Register to save articles to
your library


Paper statistics

Abstract Views