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

56 Pages Posted: 12 May 2018 Last revised: 31 Dec 2018

See all articles by Felix Zhiyu Feng

Felix Zhiyu Feng

University of Washington - Michael G. Foster School of Business

Chengdong Yin

Purdue University - Krannert School of Management

Caroline Zhu

University of Oklahoma

Date Written: December 1, 2018

Abstract

This paper examines the value of hedge fund activism from the perspective of activist hedge funds’ investors. On average, an activist hedge fund’s equity holdings of intervention targets do not perform differently from its own non-target holdings. However, its target holdings outperform its non-target holdings in the first quarter of intervention, especially if it has prior intervention experience or is familiar with the target industries. Interestingly, its target holdings contribute significantly less to its overall equity portfolio return than do its non-target holdings even when the former outperform the latter, suggesting that activist hedge funds may be underinvesting in activism.

Keywords: hedge fund, shareholder activism, portfolio analysis

JEL Classification: G23, G11, G14

Suggested Citation

Feng, Felix and Yin, Chengdong and Zhu, Caroline, The Value of Activism: A Hedge Fund Investor's Perspective (December 1, 2018). Available at SSRN: https://ssrn.com/abstract=3158826 or http://dx.doi.org/10.2139/ssrn.3158826

Felix Feng (Contact Author)

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

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

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