Did the STOCK Act Impact the Performance, Risk, and Flow of Hedge Funds?
International Journal of Managerial Finance, Forthcoming
44 Pages Posted: 1 Oct 2021 Last revised: 4 Oct 2021
Date Written: April 7, 2021
This research examines hedge funds’ performance, risk, and flow before and after the implementation of the Stop Trading on Congressional Knowledge (STOCK) Act. This study finds significant differences before and after the implementation of the STOCK Act. The results for the entire sample period indicate that hedge funds suffered lower-alpha, standard deviation, and idiosyncratic risk after the implementation of the STOCK Act. Consistent with other studies, the findings suggest that private, confidential information was likely passed down from members of Congress to hedge fund managers through intermediary agents. Furthermore, the results indicate mixed evidence for the STOCK Act’s impact on hedge funds’ flow for most investment categories, which points to the direction that top-level hedge funds received more significant capital inflows.
Keywords: Hedge funds, Legislative Acts, Fund Flow, Policy Performance
JEL Classification: G11, G23, G38
Suggested Citation: Suggested Citation