Presentations: Texas A&M University, Texas Finance PhD Student Mini Conference, 19th International Behavioural Finance Conference (Scheduled)
Abstract: I show that funding liquidity constraints shape the synchronization of hedge fund trading. Using institutional holdings data, I find that hedge fund trading synchronization increases by 16% when funding liquidity tightens by one standard deviation. Other institutional investors do not have a similar pattern. Also, I use daily transaction data from ANcerno to conduct an event-study around funding liquidity shocks and find consistent results. Further tests reveal that rather than fleeing to safety during funding constraints, hedge funds synchronize more intensely on severely mispriced stocks, with this effect driven primarily by underpriced stocks. This synchronized trading accelerates rather than impedes price discovery: severely mispriced stocks that experience greater synchronization exhibit higher price efficiency. These findings highlight the unique role of hedge funds as arbitrageurs and reveal a new channel through which intermediary capital constraints influence asset prices.
Reject and Resubmit at Journal of Financial and Quantitative Analysis
Semi-Finalist for Best Paper Award in Asset Pricing & Investments, 2025 Financial Management Association Annual Meeting
Presentations: North Carolina State University, Texas A&M University, Virginia Tech, 20th Financial Research Association Annual Conference (New Ideas Session), Finance and Accounting 2025 Annual Research Symposium, 2025 MRS International Risk Conference, 2025 Financial Management Association Annual Meeting (scheduled), 2025 Southern Finance Association Annual Meeting (scheduled)
Abstract: We infer firm connections from hedge funds’ co-search behavior in EDGAR and find that connected firms exhibit strong return predictability: annual alpha is 8.16%. Moreover, this effect is strongest for firms with complex disclosures and sparse analyst coverage, consistent with models of limited attention. We also show that hedge funds frequently churn their network of firm connections—responding to news and capturing fleeting ties among firms—and actively trade based on these connections. These findings highlight a distinct view of firm connectedness and uncover a novel channel of information flow that hedge funds translate into consistent alpha.
Best Student Paper in Asset Pricing, 64th Southwestern Finance Association Annual Meeting
Presentations: Texas A&M University, 64th Southwestern Finance Association Annual Meeting, 2025 Financial Management Association Annual Meeting (scheduled), 19th International Behavioural Finance Conference (Scheduled)
Abstract: We examine preferences implied by prospect theory in mutual fund settings. By aggregating holdings of all active equity mutual funds to stock level, we find a significantly positive relation between a stock’s prospect theory (TK) value and its holding tilt measured by the deviation of the holding weight in the aggregate active equity mutual fund from the benchmark portfolio. Specifically, a 1-SD increase in a stock’s TK value will increase the holding tilt by 100% on average. By holding stocks with high TK value, fund managers cater to their investors to attract more fund flows. In particular, among fund managers, those with higher fund ownership have significantly weaker prospect theory preferences. Furthermore, we decipher the cost and benefit of holding stocks with high TK value: it will lower future fund performance but attract more fund flows.