Do Hedge Fund Managers Work Harder Under Pressure? A Unique View From Hedge Fund Flow-Related Trading
41 Pages Posted: 29 Jul 2019 Last revised: 26 Sep 2019
Date Written: September 23, 2019
Analyzing trading of hedge funds facing substantial outflows, we find that hedge funds that ''trade against the flow'' display significant stock picking skills. Stocks purchased by hedge funds facing large outflows deliver positive ex-post abnormal returns, which are larger than those of stocks purchased upon inflows. Such ``revealed under pressure'' stock-picking skills are associated with hedge funds that are more dependent on management fee income and more prone to sudden outflows due to less stringent share restrictions.
Keywords: Flows, Trading skills, Hedge funds
JEL Classification: G11, G12, G23
Suggested Citation: Suggested Citation