Alpha by Affiliation
40 Pages Posted: 15 Feb 2020 Last revised: 26 Jun 2020
Date Written: April 23, 2020
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: Suggested Citation