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

See all articles by Xinyu Cui

Xinyu Cui

University of Manchester - Alliance Manchester Business School

Olga Kolokolova

University of Manchester - Alliance Manchester Business School

Date Written: September 23, 2019

Abstract

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

Cui, Xinyu and Kolokolova, Olga, Do Hedge Fund Managers Work Harder Under Pressure? A Unique View From Hedge Fund Flow-Related Trading (September 23, 2019). Available at SSRN: https://ssrn.com/abstract=3426553 or http://dx.doi.org/10.2139/ssrn.3426553

Xinyu Cui (Contact Author)

University of Manchester - Alliance Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Olga Kolokolova

University of Manchester - Alliance Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom
+441613062081 (Phone)

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