Anton, Miguel and Polk, Christopher (2010) Connected stocks. FMG discussion papers, 651. Financial Markets Group, London School of Economics and Political Science, London, UK.
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By connecting stocks through common active mutual fund ownership, we forecast cross-sectional variation in return covariance, controlling for similarity in style (in- dustry, size, value, and momentum), the extent of common analyst coverage, and other pair characteristics. We argue this covariance is due to contagion based on re- turn decomposition evidence, cross-sectional heterogeneity in the extent of the e¤ect, and the magnitude of average abnormal returns to a cross-stock reversal trading strat- egy exploiting information in these connections. We show that the typical long/short hedge fund covaries negatively with this strategy suggesting that hedge funds may potentially exacerbate the price dislocation we document.
|Item Type:||Monograph (Discussion Paper)|
|Additional Information:||© 2010 Financial Markets Group, London School of Economics and Political Science|
|Library of Congress subject classification:||H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
|Journal of Economic Literature Classification System:||G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates
G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies
|Sets:||Departments > Finance
Collections > Economists Online
|Date Deposited:||16 Apr 2012 11:13|
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