Do Hedge Funds Trade on Private Information? Evidence from Syndicated Lending and Short-Selling

CFA Digest ◽  
2011 ◽  
Vol 41 (2) ◽  
pp. 3-5
Author(s):  
Yazann S. Romahi
Keyword(s):  
Private Information ◽  
Hedge Funds ◽  
Short Selling

Do hedge funds trade on private information? Evidence from syndicated lending and short-selling☆

2011 ◽  
Vol 99 (3) ◽  
pp. 477-499 ◽  
Author(s):  
Nadia Massoud ◽  
Debarshi Nandy ◽  
Anthony Saunders ◽  
Keke Song
Keyword(s):  
Private Information ◽  
Hedge Funds ◽  
Short Selling

Determinants of Hedge Fund Internal Controls and Fees

2010 ◽  
Vol 85 (6) ◽  
pp. 1887-1919 ◽  
Author(s):  
Gavin Cassar ◽  
Joseph Gerakos
Keyword(s):  
Hedge Funds ◽  
Agency Costs ◽  
Hedge Fund ◽  
Short Selling ◽  
Internal Controls ◽  
Fund Managers ◽  
Asset Value ◽  
Net Asset Value ◽  
Financial Misstatements ◽  
Financial Misstatement

ABSTRACT: We investigate the determinants of hedge fund internal controls and their association with the fees that funds charge investors. Hedge funds are subject to minimal regulation. Hence, hedge fund managers voluntarily implement internal controls, and managers and investors freely contract on fees. We find that internal controls are stronger in funds with higher potential agency costs. Further, internal controls are stronger in funds domiciled in jurisdictions that provide investors with limited legal redress for fraud and financial misstatements. Short selling funds, however, are more likely to protect information about their investment positions by implementing weaker internal controls. With respect to fees, we find that the percentage of positive profits that the manager receives increases in the strength of the fund’s internal controls. Finally, removing the manager from setting and reporting the fund’s official net asset value, along with reputational incentives and monitoring by leverage providers, are all associated with lower likelihoods of future regulatory investigations of fraud and/or financial misstatement.

Disclosure Policies of Investment Funds

2015 ◽  
Vol 05 (01) ◽  
pp. 1550004 ◽  
Author(s):  
Thomas J. George ◽  
Chuan-Yang Hwang
Keyword(s):  
Mutual Funds ◽  
Private Information ◽  
Hedge Funds ◽  
Poor Performance ◽  
Securities Markets ◽  
Public Disclosure ◽  
Investment Funds ◽  
Portfolio Holdings ◽  
Liquidity Provision ◽  
Future Performance

We examine voluntary and mandated disclosure of portfolio holdings by investment funds in a model where funds are characterized as having a stream of investment ideas and as providing liquidity to investors through redemption. We show that the greater is the fund's liquidity provision role, the more aggressively the fund trades on its ideas, the stronger is its preference to disclose information about its holdings voluntarily, and the weaker is its performance. We also show that mandatory disclosure can decrease information available in securities markets by crowding out the acquisition of private information that, through funds' trading, would be reflected in prices. Our model provides an explanation for why hedge funds and mutual funds differ in their resistance to public disclosure, and is consistent with stylized facts regarding how funds' investment decisions respond to poor performance and how differences in disclosure policies affect the future performance of well versus poorly performing funds.

Hedge Funds in M&A Deals: Is There Exploitation of Private Information?

2010 ◽  
Author(s):  
Rui Dai ◽  
Nadia Massoud ◽  
Debarshi K. Nandy ◽  
Anthony Saunders
Keyword(s):  
Private Information ◽  
Hedge Funds

scholarly journals Short Covering Trades

2018 ◽  
Vol 53 (2) ◽  
pp. 723-748 ◽  
Author(s):  
Ekkehart Boehmer ◽  
Truong X. Duong ◽  
Zsuzsa R. Huszár
Keyword(s):  
Transaction Costs ◽  
Empirical Evidence ◽  
Positive Reaction ◽  
Private Information ◽  
Short Selling ◽  
Short Sellers ◽  
Timing Ability ◽  
Position Data ◽  
Future Events ◽  
Short Covering

Short sellers are known to have private information about security prices. Empirical evidence of short selling, however, is based on only half of short sellers’ trading activity; specifically, the opening of the position. Using disclosed large-short-position data from the Japanese stock market, we provide the first detailed evidence of covering trades and find a positive reaction to short covering that only partially reverses. Although these results are consistent with substantial transaction costs for closing large short positions, they also reveal that some short sellers are privately informed about positive future events and have timing ability in covering positions.

The Effect of Regulatory Constraints on Fund Performance: New Evidence from UCITS Hedge Funds*

2020 ◽  
Author(s):  
Juha Joenväärä ◽  
Robert Kosowski
Keyword(s):  
Indirect Cost ◽  
Hedge Funds ◽  
Fund Performance ◽  
Short Selling ◽  
Fund Manager ◽  
Management Company ◽  
Regulatory Constraints ◽  
Matching Estimator ◽  
Performance Results ◽  
New Evidence

Abstract This article examines the effect of regulatory constraints on fund performance and risk by comparing conventional and UCITS hedge funds. Using a matching estimator approach, we estimate the indirect cost of UCITS regulation to be between 1.06% and 4.05% per annum in terms of risk-adjusted returns. These performance differences are likely to stem from UCITS constraints such as those governing eligible assets, diversification, and short selling, and cannot be explained by differences in redemption terms or level of leverage. We confirm that our performance results are not driven by management company characteristics, fund manager characteristics, or unobserved confounder bias.

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