When Hedge and Non-Hedge Funds Disagree

Disagreement between Hedge Funds and Other Institutional Investors and the Cross-Section of Expected Stock Returns

AuthorsMustafa Onur Çağlayan; Umut Celiker; Gokhan Sonaer

Paper linkhttps://papers.ssrn.com/sol3/papers.cfm?abstract_id=3705635

This strategy tracks NYSE, AMEX, and NASDAQ stocks, filtering out weak ones. Each quarter, it compares hedge fund versus non-hedge fund ownership changes, going long on disagreement stocks and short on agreement stocks.

The idea rests on how hedge funds and non-hedge funds process information differently. Hedge funds rely more on private insights, while non-hedge funds depend on public news, creating profitable disagreement-driven opportunities.