@article{c5f8db02cfdd43039b7e22b83b723664,
title = "Hedge fund crowds and mispricing",
abstract = "Recent models and the popular press suggest that large groups of hedge funds follow similar strategies resulting in crowded equity positions that destabilize markets. Inconsistent with this assertion, we find that hedge fund equity portfolios are remarkably independent. Moreover, when hedge funds do buy and sell the same stocks, their demand shocks are, on average, positively related to subsequent raw and risk-adjusted returns. Even in periods of extreme market stress, we find no evidence that hedge fund demand shocks are inversely related to subsequent returns. Our results have important implications for the ongoing debate regarding hedge fund regulation.",
keywords = "Crowds, Hedge funds, Market efficiency",
author = "Richard Sias and Turtle, {H. J.} and Blerina Zykaj",
note = "Funding Information: The authors thank Vikas Agarwal, George Aragon, Phelim Boyle, Nicole Boyson, Gjergji Cici, Darrell Duffie, John Griffin, Wei Jiang (the department editor), Andrew Karolyi, Eric Kelley, Alexander Kurov, Mathias Kruttli, Jeff Nickel, Blake Phillips, Clemens Sialm (the associate editor), Laura Starks, and Sterling Yan, as well as seminar participants at Colorado State University, Cornell University, Indiana University, Texas Tech University, the University of Arizona, the University of Cincinnati, the University of Texas at San Antonio, the University of Waterloo, the 2013 Asian Financial Management Association meetings, the 2013 Western Finance Association meetings, the 2014 Finance Down Under meetings, and the 2014 European Finance Association meetings for their helpful comments. The authors thank Luke DeVault for excellent research assistance. Portions of this work were completed while H. J. Turtle was at West Virginia University. Turtle also acknowledges financial support from the Dean''s Scholars Summer Research Grant and the Kennedy-Van Scoy Fund. The authors thank Andrew Ang, Ken French, David Hsieh, Russ Wermers, and Thomson Reuters for providing data. Publisher Copyright: {\textcopyright} 2016 INFORMS.",
year = "2016",
month = mar,
doi = "10.1287/mnsc.2014.2131",
language = "English (US)",
volume = "62",
pages = "764--784",
journal = "Management Science",
issn = "0025-1909",
publisher = "INFORMS Inst.for Operations Res.and the Management Sciences",
number = "3",
}