Alpha by affiliation

doi:10.1016/j.jbankfin.2026.107751

Alpha by affiliation

2026-06-01

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DOI：10.1016/j.jbankfin.2026.107751

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Abstract

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Using proprietary data to identify employment-connected hedge fund families, we find highly coordinated trades within families predict abnormal stock returns. Alphas are pronounced within smaller families, peak before holdings are publicly disclosed, and do not reverse, implying that coordinated trades by small networks quickly reduce stock mispricing. Alphas remain robust when controlling for hedge fund industry crowding, herding, and the geographic proximity of other funds. Overall, we provide novel evidence that network effects are robust to and distinct from industry-level effects.

Keywords:

Crowdedness

Hedge funds

Herding

Information diffusion

Networks

Stock return predictability

Alpha by affiliation

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