Where Do Hedge Fund Activists Trade?

63 Pages Posted: 12 Dec 2018

See all articles by Mao Ye

Mao Ye

University of Illinois at Urbana-Champaign; National Bureau of Economic Research (NBER)

Wei Zhu

University of Illinois at Urbana-Champaign - Department of Accountancy

Date Written: November 28, 2018

Abstract

Before intervening in corporate governance, hedge fund activists usually acquire a large stake in a firm, and this information is private until they file Schedule 13D. We analyze their choice between the lit exchange and the dark pool. Our model predicts that the market share of the dark pool increases when an activist trades, and it increases more when the value of information is higher. Our evidence indicates that the market share of the dark pool increases 11% when an activist trades, and a one standard deviation increase in the value of information increases the dark pool share by 17%.

Keywords: hedge fund activism, dark pool, price manipulation, rational expectation equilibrium

JEL Classification: G12, G34

Suggested Citation

Ye, Mao and Zhu, Wei, Where Do Hedge Fund Activists Trade? (November 28, 2018). Available at SSRN: https://ssrn.com/abstract=3292516

Mao Ye (Contact Author)

University of Illinois at Urbana-Champaign ( email )

406 Wohlers
1206 South 6th Street
Champaign, IL 61820
United States
2172440474 (Phone)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Wei Zhu

University of Illinois at Urbana-Champaign - Department of Accountancy ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

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