The Value of Activism: A Hedge Fund Investor's Perspective
56 Pages Posted: 12 May 2018 Last revised: 12 Sep 2020
Date Written: December 1, 2018
This paper examines the value of hedge fund activism from the perspective of activist hedge funds’ investors. On average, an activist hedge fund’s equity holdings of intervention targets do not perform differently from its own non-target holdings. However, its target holdings outperform its non-target holdings in the first quarter of intervention, especially if it has prior intervention experience or is familiar with the target industries. Interestingly, its target holdings contribute significantly less to its overall equity portfolio return than do its non-target holdings even when the former outperform the latter, suggesting that activist hedge funds may be underinvesting in activism.
Keywords: hedge fund, shareholder activism, portfolio analysis
JEL Classification: G23, G11, G14
Suggested Citation: Suggested Citation