Disagreement between Hedge Funds and Other Institutional Investors and the Cross-Section of Expected Stock Returns

58 Pages Posted: 9 Oct 2020 Last revised: 11 Aug 2021

See all articles by Mustafa Onur Caglayan

Mustafa Onur Caglayan

Florida International University

Umut Celiker

Cleveland State University - Monte Ahuja College of Business

Gokhan Sonaer

Duquesne University

Date Written: August 6, 2021

Abstract

We find that strong disagreements between hedge funds and other institutions in their common stock trades are twice as likely as agreements. The overall success of hedge funds’ trades is confined to disagreement stocks. While hedge funds are on average positive feedback traders, albeit weaker than other institutions, they are neither positive nor negative feedback traders for stocks heavily sold by other institutions. Hedge funds also depend less on earnings news. Our findings highlight the importance of disagreement in studying the performance of institutional investors’ trades and are consistent with the notion that skilled investors rely less on public information.

Keywords: disagreement, institutional trading, hedge funds

JEL Classification: G10, G11, C13

Suggested Citation

Caglayan, Mustafa Onur and Celiker, Umut and Sonaer, Gokhan, Disagreement between Hedge Funds and Other Institutional Investors and the Cross-Section of Expected Stock Returns (August 6, 2021). Available at SSRN: https://ssrn.com/abstract=3705635 or http://dx.doi.org/10.2139/ssrn.3705635

Mustafa Onur Caglayan (Contact Author)

Florida International University ( email )

College of Business
11200 S.W. 8th St, Ryder Building 223B
Miami, FL 33199
United States
(305) 348-8430 (Phone)

HOME PAGE: http://https://business.fiu.edu/faculty/expert-guides.cfm?FlagDirectory=Display&EMP=caglayanm

Umut Celiker

Cleveland State University - Monte Ahuja College of Business ( email )

1860 E 18th St #420
Cleveland, OH 44114
United States

Gokhan Sonaer

Duquesne University

600 Forbes Avenue
Pittsburgh, PA 15282
United States

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