Skip to main content
Article thumbnail
Location of Repository

Do Hedge Funds Manipulate Stock Prices?

By Itzhak Ben-David, Francesco Franzoni, Augustin Landier and Rabih Moussawi


We find evidence of significant price manipulation at the stock level by hedge funds on critical reporting dates. Stocks in the top quartile by hedge fund holdings exhibit abnormal returns of 30 basis points in the last day of the month and a reversal of 25 basis points in the following day. Using intraday data, we show that a significant part of the return is earned during the last minutes of the last day of the month, at an increasing rate towards the closing bell. This evidence is consistent with hedge funds’ incentive to inflate their monthly performance by buying stocks that they hold in their portfolios. Higher manipulations occur with funds that have higher incentives to improve their ranking relative to their peers and a lower cost of doing so.

OAI identifier:

Suggested articles


  1. (2004). An Econometric Model of Serial Correlation and Illiquidity in Hedge Fund Returns,
  2. (2010). Caught in the Act: How Hedge Funds Manipulate their Equity Positions, Working Paper,
  3. (2009). Caught on Tape: Institutional Trading, Stock Returns, and Earnings Announcements,
  4. (2008). Conditional Return Smoothing in the Hedge Fund Industry,
  5. (1992). Consumer Reaction to Measures of Poor Quality: Evidence from the Mutual Fund Industry,
  6. (1998). Costly Search and Mutual Fund Flows,
  7. (2001). Do Hedge Funds Hedge?, Working Paper,
  8. (2009). Do Hedge Funds Misreport Returns? Evidence from Pooled Distributions,
  9. (2010). Hedge Fund Stock Trading during the Financial Crisis of 2007-2008,
  10. (2004). Hedge Funds and the Technology Bubble,
  11. (2002). Illiquidity and Stock Returns: Cross-Section and Time-Series Effects,
  12. (2010). Inferring Reporting Biases in Hedge Fund Databases from Hedge Fund Equity Holdings, Working Paper,
  13. (2006). Large Investors, Price Manipulation, and Limits to Arbitrage: An Anatomy of Market Corners,
  14. (2002). Leaning for the Tape: Evidence of Gaming Behavior in Equity Mutual Funds,
  15. (1999). Managerial Incentive Problems: A Dynamic Perspective,
  16. (1997). Measuring Mutual Fund Performance with Characteristic Based Benchmarks,
  17. (2000). Mutual Fund Performance: An Empirical Decomposition into Stock-Picking Talent, Style, Transactions Costs, and Expenses,
  18. (2005). Stock Price Clustering on Option Expiration Dates,
  19. (2010). The Long-Short Wars: Evidence of End-ofYear Manipulation by Short Sellers, Working Paper,
  20. (2008). Which Shorts are Informed?,

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.