Topic: Hedge Fund Holdings and Stock Market Efficiency
Speaker: Charles Cao, Unigroup Chair Professor & Associate Dean, PBC School of Finance, Tsinghua University
Date: December 24th, 2014 (Wed.)
Time: 2:00-3:30pm
Location: Building 4, Room 101
Language: English
Abstract:
We examine the relation between changes in hedge fund equity holdings and measures of informational efficiency of stock prices derived from transactions data, and find that, on average, increased hedge fund ownership leads to significant improvements in the informational efficiency of stock prices. The contribution of hedge funds to price efficiency is greater than the contributions of other types of institutional investors, such as mutual funds or banks. However, stocks held by hedge funds experienced extreme declines in price efficiency during liquidity crises, most notably in the last quarter of 2008, and the declines were most severe in stocks held by hedge funds connected to Lehman Brothers and hedge funds using leverage.
