Alpha by Affiliation

52 Pages Posted: 15 Feb 2020 Last revised: 2 Jun 2024

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: October 29, 2023

Abstract

Using proprietary data to identify employment-connected hedge fund families, we find highly coordinated trades within families predict abnormal returns over the next three months. Results are robust to controlling for other trades within the family, hedge fund industry crowding and herding, and geographic proximity. Effects are pronounced within smaller networks and over short (long) horizons among larger (small) capitalization stocks, suggesting that hedge fund families face arbitrage frictions among the most mispriced stocks. Overall, findings confirm social networks of fund managers remain a distinct channel for information diffusion into stock prices.

Keywords: Crowdedness, Hedge Funds, Herding, Information Diffusion, Networks, Stock Return Predictability

JEL Classification: G11, G12, G14, G23, G40

Suggested Citation

Patel, Nimesh and Spilker III, Harold D. and Reuter, Jonathan, Alpha by Affiliation (October 29, 2023). 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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