Hedge fund crowds and mispricing

Richard W Sias, H. J. Turtle, Blerina Zykaj

Research output: Contribution to journalArticle

26 Scopus citations


Recent models and the popular press suggest that large groups of hedge funds follow similar strategies resulting in crowded equity positions that destabilize markets. Inconsistent with this assertion, we find that hedge fund equity portfolios are remarkably independent. Moreover, when hedge funds do buy and sell the same stocks, their demand shocks are, on average, positively related to subsequent raw and risk-adjusted returns. Even in periods of extreme market stress, we find no evidence that hedge fund demand shocks are inversely related to subsequent returns. Our results have important implications for the ongoing debate regarding hedge fund regulation.

Original languageEnglish (US)
Pages (from-to)764-784
Number of pages21
JournalManagement Science
Issue number3
StatePublished - Mar 1 2016



  • Crowds
  • Hedge funds
  • Market efficiency

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research

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