Alpha by Affiliation

40 Pages Posted: 15 Feb 2020 Last revised: 15 Nov 2020

See all articles by Nimesh Patel

Nimesh Patel

University of Hawai'i at Manoa, Shidler College of Business

Harold D. Spilker III

University Of Hawaii At Manoa, Shidler College of Business

Jonathan Reuter

Boston College - Department of Finance; National Bureau of Economic Research (NBER)

Date Written: April 23, 2020

Abstract

Using novel data establishing hedge fund families, we show that changes in overlapping hedge fund family positions predict abnormal returns in U.S. stocks. A long-short portfolio of unanimous family entries and exits in overlapping positions earns an annualized alpha of 7.32%. Panel regressions and double-sorts provide evidence for a mispricing-based explanation as results are consistent with fund families facing binding short sale constraints to coordinated exits. The returns are larger for high information asymmetry stocks and suggest that hedge fund families coordinate on information, despite having no shared legal structure like mutual fund families.

Keywords: Hedge Funds, Fund Families, Networks, Stock Returns

JEL Classification: G11, G12, G23, G40

Suggested Citation

Patel, Nimesh and Spilker III, Harold D. and Reuter, Jonathan, Alpha by Affiliation (April 23, 2020). Available at SSRN: https://ssrn.com/abstract=3518906 or http://dx.doi.org/10.2139/ssrn.3518906

Nimesh Patel

University of Hawai'i at Manoa, Shidler College of Business ( email )

Honolulu, HI 96815
United States

Harold D. Spilker III (Contact Author)

University Of Hawaii At Manoa, Shidler College of Business ( email )

2404 Maile Way
Honolulu, HI 96822
United States
8089568738 (Phone)

Jonathan Reuter

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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