@article {Schmitz100, author = {Jonas Tobias Schmitz}, title = {Does the Disclosure of a Hedge Fund Stock Sale Influence Respective Stock Returns?}, volume = {23}, number = {3}, pages = {100--115}, year = {2020}, doi = {10.3905/jai.2020.1.120}, publisher = {Institutional Investor Journals Umbrella}, abstract = {The author investigates stock returns surrounding activism-related stock sales. Previous studies focus on the last sale of the hedge fund, while this article examines the initial sale of a target{\textquoteright}s stock. The author determines abnormal stock returns using factor models and compares the target{\textquoteright}s stock return with the performance of the S\&P 500 Index. The additional method might be more intuitive for unsophisticated investors in comparison with the complexity of the factor models. He shows that a hedge fund{\textquoteright}s initial sale of stock led to stagnating abnormal returns when activists were successful and negative abnormal returns otherwise. Furthermore, he reveals that target stocks experience similar returns as the S\&P 500 and the Russell 1000 Value Index subsequent to the hedge fund{\textquoteright}s sale disclosure. The results are relevant for existing shareholders of a target company.TOPICS: Real assets/alternative investments/private equity, information providers/credit ratings, security analysis and valuation, performance measurementKey Findings▪ Previous studies focus on hedge funds{\textquoteright} last disclosure of the sale of stock in an activist position. This article examines the initial sale of target company stocks, which may indicate the inception of a hedge fund{\textquoteright}s complete exit.▪ Hedge funds{\textquoteright} initial stock sales led to stagnating abnormal returns when activists were successful and negative abnormal returns otherwise. This result is consistent with pre-existing evidence on last-sale disclosures of hedge funds.▪ From the day after the sale-related disclosure, target stocks perform, on average, like the S\&P 500 Index. This finding evokes questions about whether the remaining shareholders should transfer their stock investment into index funds.}, issn = {1520-3255}, URL = {https://jai.pm-research.com/content/23/3/100}, eprint = {https://jai.pm-research.com/content/23/3/100.full.pdf}, journal = {The Journal of Alternative Investments} }