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On the Other Side of Hedge Fund Equity Trades

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On the Other Side of Hedge Fund Equity Trades. / Cui, Xinyu; Kolokolova, Olga; Wang, George.
In: Management Science, Vol. 70, No. 6, 30.06.2024, p. 3684-3710.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

Cui, X, Kolokolova, O & Wang, G 2024, 'On the Other Side of Hedge Fund Equity Trades', Management Science, vol. 70, no. 6, pp. 3684-3710. https://doi.org/10.1287/mnsc.2023.4877

APA

Cui, X., Kolokolova, O., & Wang, G. (2024). On the Other Side of Hedge Fund Equity Trades. Management Science, 70(6), 3684-3710. https://doi.org/10.1287/mnsc.2023.4877

Vancouver

Cui X, Kolokolova O, Wang G. On the Other Side of Hedge Fund Equity Trades. Management Science. 2024 Jun 30;70(6):3684-3710. Epub 2023 Jul 31. doi: 10.1287/mnsc.2023.4877

Author

Cui, Xinyu ; Kolokolova, Olga ; Wang, George. / On the Other Side of Hedge Fund Equity Trades. In: Management Science. 2024 ; Vol. 70, No. 6. pp. 3684-3710.

Bibtex

@article{4a988a16d6ed4ce28e06189f03024e7b,
title = "On the Other Side of Hedge Fund Equity Trades",
abstract = "Hedge funds earn positive ex post abnormal returns and avoid negative abnormal returns on their equity portfolios when trading in the opposite direction of highly diversified low-turnover institutional investors (quasi indexers). This pattern seems to be driven by the preferences of quasi indexers for high-market-beta stocks together with the ability of hedge funds to identify subsets of especially profitable trades. It remains pronounced when accounting for other determinants of hedge fund trades, such as stock liquidity, market anomalies, and major corporate events. Trading against other institutional investors or noninstitutions does not result in abnormal performance for hedge funds. This paper was accepted by David Sraer, finance. Supplemental Material: Data and the online appendix are available at https://doi.org/10.1287/mnsc.2023.4877 .",
keywords = "Institutional Trading, Alpha, Market Beta, Market Anomalies, Quasi-Indexers, Hedge Funds",
author = "Xinyu Cui and Olga Kolokolova and George Wang",
year = "2024",
month = jun,
day = "30",
doi = "10.1287/mnsc.2023.4877",
language = "English",
volume = "70",
pages = "3684--3710",
journal = "Management Science",
issn = "0025-1909",
publisher = "INFORMS Inst.for Operations Res.and the Management Sciences",
number = "6",

}

RIS

TY - JOUR

T1 - On the Other Side of Hedge Fund Equity Trades

AU - Cui, Xinyu

AU - Kolokolova, Olga

AU - Wang, George

PY - 2024/6/30

Y1 - 2024/6/30

N2 - Hedge funds earn positive ex post abnormal returns and avoid negative abnormal returns on their equity portfolios when trading in the opposite direction of highly diversified low-turnover institutional investors (quasi indexers). This pattern seems to be driven by the preferences of quasi indexers for high-market-beta stocks together with the ability of hedge funds to identify subsets of especially profitable trades. It remains pronounced when accounting for other determinants of hedge fund trades, such as stock liquidity, market anomalies, and major corporate events. Trading against other institutional investors or noninstitutions does not result in abnormal performance for hedge funds. This paper was accepted by David Sraer, finance. Supplemental Material: Data and the online appendix are available at https://doi.org/10.1287/mnsc.2023.4877 .

AB - Hedge funds earn positive ex post abnormal returns and avoid negative abnormal returns on their equity portfolios when trading in the opposite direction of highly diversified low-turnover institutional investors (quasi indexers). This pattern seems to be driven by the preferences of quasi indexers for high-market-beta stocks together with the ability of hedge funds to identify subsets of especially profitable trades. It remains pronounced when accounting for other determinants of hedge fund trades, such as stock liquidity, market anomalies, and major corporate events. Trading against other institutional investors or noninstitutions does not result in abnormal performance for hedge funds. This paper was accepted by David Sraer, finance. Supplemental Material: Data and the online appendix are available at https://doi.org/10.1287/mnsc.2023.4877 .

KW - Institutional Trading

KW - Alpha, Market Beta

KW - Market Anomalies

KW - Quasi-Indexers

KW - Hedge Funds

U2 - 10.1287/mnsc.2023.4877

DO - 10.1287/mnsc.2023.4877

M3 - Journal article

VL - 70

SP - 3684

EP - 3710

JO - Management Science

JF - Management Science

SN - 0025-1909

IS - 6

ER -