Do Hedge Funds Benefit From Pre-M&A Announcement Tip Offs?

When a hedge fund moves in on a stock just ahead of some good news you always have to wonder if the fund got lucky, made an inference from public information that worked out, or (as many will inevitably suspect) was acting on insider information. To shed some light on the issue, a team of researchers focused abnormal hedge fund trading activity ahead of M&A announcements, and while the evidence is circumstantial it suggests that insider trading is fairly common in such circumstances. “Our results from the full battery of tests we conduct are suggestive of some short-term hedge funds…