Abstract
We find no evidence that hedge funds manipulate stock prices from 2011 to 2019, while confirming strong stock price manipulation pattern previously documented between 2000 and 2010. Stocks held by hedge funds exhibit positive abnormal returns and then reversals at quarter end in the earlier period; however, there is no relation between hedge fund ownership and end-of-quarter stock returns in the later period. Hedge fund market discipline is related to proactive actions of regulators. End-of-quarter stock price manipulation decreases with the number of the Security and Exchange Commission litigation cases involving hedge funds in that quarter. Investor flows, on the contrary, react positively on last-trading-day of a quarter hedge fund portfolio returns, creating incentives for stock price manipulation by hedge funds.
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