Massachusetts Institute of Technology MIT - Sloan School of Management; National Bureau of Economic Research NBER ; Massachusetts Institute of Technology MIT - Computer Science and Artificial Intelligence Laboratory CSAIL. There are 2 versions of this paper. We study the relation between hedge fund equity holdings and measures of informational efficiency of stock prices derived from intraday transactions, as well as daily data. Our findings support the role of hedge funds as arbitrageurs who reduce mispricing in the market.

Hedge funds invest in relatively inefficiently priced stocks, and the price efficiency of these stocks improves after hedge funds increase their holdings.

Hedge fund ownership contributes more to efficient pricing than does ownership by other types of institutional investors. However, stocks held by hedge funds experienced large declines in price efficiency during several liquidity crises. Cao, Charles and Liang, Bing and Lo, Andrew W.

Hedge Fund Holdings and Stock Market Efficiency by Charles Cao, Bing Liang, Andrew W. Lo, Lubomir Petrasek :: SSRN

Review of Asset Pricing Studies RAPSForthcoming. Department of Finance Smeal College of Business University Park, PA United States Phone Fax. Subscribe to this fee journal for more curated articles on this topic.

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Charles Cao Pennsylvania State University Bing Liang University of Massachusetts Amherst - Department of Finance Andrew W. Lo Massachusetts Institute of Technology MIT - Sloan School of Management; National Bureau of Economic Research NBER ; Massachusetts Institute of Technology MIT - Computer Science and Artificial Intelligence Laboratory CSAIL Lubomir Petrasek Federal Reserve Board.

Hedge Fund Holdings and Stock Market Efficiency FEDS Working Paper No. Hedge Fund Holdings and Stock Market Efficiency Review of Asset Role of hedge funds in the stock market efficiency Studies RAPS foreign exchange rates bank of montreal, Forthcoming.

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Abstract We study the relation between hedge fund equity holdings and measures of informational efficiency of stock prices derived from intraday transactions, as well as daily data. Charles Cao Pennsylvania State University email Department of Finance Smeal College of Business University Park, PA United States Phone Fax HOME PAGE: Bing Liang University of Massachusetts Amherst - Department of Finance email Amherst, MA United States.

Lo Massachusetts Institute of Technology MIT - Sloan School of Management email Main Street E Cambridge, MA United States Phone Fax HOME PAGE: National Bureau of Economic Research NBER email Massachusetts Avenue Cambridge, MA United States.

Massachusetts Institute of Technology MIT - Computer Science and Artificial Intelligence Laboratory CSAIL Stata Center Cambridge, MA United States.

Lubomir Petrasek Contact Author Federal Reserve Board email 20th Street and Constitution Avenue NW Washington, DC United States. Download this Paper Open PDF in Browser. Related eJournals Capital Markets: Market Efficiency eJournal Follow.

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