The role of hedge funds in the asset pricing: evidence from China

We document that hedge funds nurture mispricing in the Chinese financial market. examine relationship between fund holdings and degree of mispricing, assuming funds’ stock are mainly for arbitrage not hedging. also this with without short-selling restrictions. Hedge intentionally hold overvalued stocks. Their trades, which generate an abnormal return 1.78% per month, impede dissipation mispricing. Furthermore, we find trend-chasing may explain why prefer to This research provides a new perspectives on information content potential investment value emerging markets.