The Role of Hedge Funds in the Asset Pricing: Evidence from China

Jing Zhang, Wei Zhang, Youwei Li and Xu Feng

MPRA Paper from University Library of Munich, Germany

Abstract: We document that hedge funds nurture mispricing in the Chinese financial market. We exploit the relationship between hedge fund holdings and the degree of mispricing in case that hedge fund holdings of stocks are mainly for arbitrage purpose but not for hedging, and that with and without short-selling restrictions. Hedge funds intentionally hold overvalued stocks. Their trades, which generate an abnormal return to 1.78% per month, also impede the dissipation of stock mispricing. Further, we find trend chasing may be the reason why hedge funds prefer to hold overvalued stocks. This research sheds new lights on the information content and potential investment value of hedge funds holdings in emerging markets.

Keywords: Hedge funds; stock mispricing; asset pricing; arbitrage (search for similar items in EconPapers)
JEL-codes: G11 G12 G23 (search for similar items in EconPapers)
Date: 2021-01
New Economics Papers: this item is included in nep-cna, nep-cwa and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/105377/1/MPRA_paper_105377.pdf original version (application/pdf)

Related works:
Journal Article: The role of hedge funds in the asset pricing: evidence from China (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:105377

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().