Conviction And Volume: Measuring The Information Content Of Hedge Fund TradingVW Staff
Conviction And Volume: Measuring The Information Content Of Hedge Fund Trading by Jonathan Rhinesmith, Scholar At Harward
I provide novel evidence that hedge funds predict and drive the movement of asset prices towards fundamental value. Willingness to move prices, proxied by the share of trading volume consumed, reveals information: the volume consumed by quarterly hedge fund trades strongly predicts future stock returns. The top decile of purchases generates abnormal returns of 5-9% annualized during the following quarter (t-stat 4.4-6.5). Interpreting this phenomenon . . .
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